Derivative Services, an affiliate of the international law firm Allen & Overy, has launched a legal risk management service aimed at addressing the complex legal analysis required to take on collateral for derivatives transactions.CSAnalytics, which is accessed online, aims to help its subscribers reduce legal and credit risks, as well as to manage costs by simplifying the collateral process.
“There are 33 International Swaps and Derivatives Association collateral opinions alone, and standardising the analysis across all the jurisdictions can be a complex process,” said Carolyn Jackson, an associate in Allen & Overy’s derivatives services group.
CSAnalytics focuses on a number of legal risks, which are central to effective legal risk management. These include conflicts–of-law rules, the recognition of security interests and title transfer arrangements, whether the use of collateral is permitted, and the re-characterisation risks and enforcements related to the three principal approaches to taking collateral - the New York law pledge, the English law security interest and the English law title transfer.
At its heart, CSAnalytics uses Isda collateral opinions from which standardised templates are drawn up and presented to the user. These flag any concerns or issues in the opinions via the use of a colour-coded metric. The system enables users to mitigate risk by helping to ensure they take beneficial actions such as securing the best possible collateral protection and the best documentation to strengthen their legal position in relation to collateral. System users can assess the legal risk management of collateral using both a qualitative and quantitative framework.
“By centralising and standardising analytical and legal resources, CSAnalytics also helps get the best capital treatment for collateralised transactions in a cost- and time-effective way,” Marc-Henri Chamay, head of e-business at Allen & Overy, told RiskNews.
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