The major market structural changes that this is driven by include:

•Liquidity regulations in addition to capital regulations

•Lower velocity of collateral – restrictions on re-use and re-hypothecation

•The proliferation of CCPs with differing margin algorithms and increased contributions to default funds – initial and variation margin is going to increase

The impact of each of these changes on global eligible collateral is shown below:

Global Collateral Management Services and SolutionsA Rapidly Changing, Challenging and Complex Global Environment

The world’s financial markets are going through rapid changes – driven by new laws and regulations, changing market infrastructure and various macro-economic challenges including increased exposure amongst counterparties. For markets to function efficiently, the right collateral needs to get to where it is needed, when it is needed. This is rapidly becoming a real-time requirement. The supply of “prime” collateral is finite, and the demand for safe, liquid collateral assets is escalating to the point where demand will soon exceed the available supply.

Figure 1 Outstanding Amounts of Marketable Potentially Safe Assets

Key ChallengesOperating in this challenging business landscape requires significant upgrades by the financial institutions to their collateral management processes and systems. The challenges that need to be addressed include:

•Consolidation and Cost Control: Continuing to operate BAU processes and systems while undertaking the business and technology solutions required for increased capacity, capabilities, products and services.

•Managing Collateral Agreements: Counterparty collateral agreements are impacted by regulatory changes (e.g., removal of thresholds and minimum transfer amounts), changes in collateral eligibility rules, and CCP changes to margining algorithms – collateral agreement information needs to be available on demand.

•Counterparty Exposure and Margin Processing: Mandatory clearing, the growing multitude of clearinghouses, separation of margin calls for IM and VM, all contribute to a major increase in margin call activity estimated to reach 5 – 10x current volumes. CCP margin algorithms are changing and the differences between the CCPs need to be well understood and calculated into the cost of clearing – the collateral costs are quantifiable, and decision support tools can be deployed to minimize the cost of clearing and optimize collateral assets

•Reconciliation: Multiple settlement cycles, including intraday, complicate collateral reconciliation – a regulatory requirement.

Our Solutions and ServicesWhile there is no easy single solution to meet all of the challenges , Genpact believes that robust reference data coupled with a centralized Collateral Management and Margining Operations and Platform is necessary to control complexity and costs. Not only will this enable the firm to launch new products more quickly and better manage counterparty risk, but will also unlock capital that is very much needed to meet the new regulatory requirements.

Strategic Advisory ServicesOur Services comprise:

•Current State assessment and Process and Systems re-engineering,supported by our proprietary SEP™ methodology that drives improvement through business- outcome-driven process metrics.

•Future state roadmap and target model construction including detailed transition plan, platform consolidation, change, decommissioning, and operational process improvement.

Collateral Agreement Reference Data Services (CARDS)Real time margin management and intra-day collateral management are key for financial firms to survive and grow. Financial institutions must be able to manage collateral across multiple counterparties, settlement systems, exchanges and clearing venues with diverse margin and collateral requirements – including distinctly different CCP margin models, and multiple and intraday settlement cycles and deadlines.

What CARDS does:

•Collate and manage ALL Collateral Support Documents

•Extract economic and non economic attributes of the agreements

•Maintain and update CCP/Clearinghouse margin models

•Maintain electronically key collateral management rules – eligibility rules, margin and margin call rules (minimum thresholds, minimum transfer amounts, call timings, etc), dynamic haircut rules, concentration limits, re-use and rehypothecation eligibility, and counterparty SSIs.

•Continuous updating of this data based on counterparty changes, new agreements, and margin model changes.

Managed Services - Shared Services UtilityMany common operational and systemic functions supporting enterprise collateral management lend themselves to a shared services environment: CCP margin models and collateral eligibility rules, CCP margin call validation, collateral pricing and valuation, settlement cycle models, cross-product margining for prime services and margin call generation, matching and processing are examples. We are building the Shared Services Utility to provide a complete collateral management service, as well as modular services where you select services which best complement your institution’s operational model. The benefits:

•Operational cost reduction: transform fixed costs into a variable cost model

•Reduce development costs: the Shared Services model must be continuously updated to meet emerging market requirements common to utility users

•Focus on top-line revenue generation

Margin Call Processing (BPM Services)Margin call processing as a managed business process service is a complementary service to our Collateral Agreement Reference Data Service (CARDS), or can be used as a stand-alone service from Genpact. When used in conjunction with CARDS, our service can dramatically

lower costs in matching and validating margin calls, and and reduce the both number of disputes and facilitate timely dispute resolution. Genpact is a highly experienced margin call processing company, and our services include both:

•Generation and sending margin calls

•Processing in-bound margin calls.

•Call and receivables aging and collection.

Collateral Reconciliation ServicesThe complexities of managing margin and collateral in real time makes collateral reconciliation a dynamic and challenging throughout-the-day process. The CARDS service coupled with real time collateral inventory management enables efficient and accurate collateral reconciliation. Our Collateral Reconciliation Service includes:

•Trade portfolio reconciliation with counterparties

• Intraday/End-of-day collateral position reconciliation

•Analysis and resolution of breaks

•Reconciliation of interest vs counterparty statements

•Daily reconciliation with CCPs

•Generation of month-end billing statements for external and internal clients

Margin/Collateral Pre-Trade Analytic ToolsDifferences in margin models amongst CCPs and Clearinghouses carry multiple cost elements impacting trading profitability and portfolio performance. The analytics provide decision support to choice of CCP or Clearing Broker, as well as whether to submit the trade for clearing or go bi-lateral, and also provides decision support for selecting a clearing venue which offers the most protection and safety. The benefits:

•Cost of trade/portfolio strategy calculation

•Cost reduction/increased profitability/alpha

Why Genpact Headstrong Capital Markets?Genpact- Headstrong combines people, process and technology in delivering solutions for our clients, and with our large number of clients across the global capital markets spectrum, we have the scale required to provide modular solutions that are right for each client’s business needs. We take costs out of your business through restructuring, operational lift-outs, and monetization of functions, enabling you to focus on serving your clients and providing them with the products and services to sustain your business growth, while ensuring that the enterprise itself has the funding and liquidity capacity to withstand adverse market conditions.

About Genpact

Genpact Limited (NYSE: G), a global leader in business process management and technology services, leverages the power of smarter processes, smarter analytics and smarter technology to help its clients drive intelligence across the enterprise. Genpact’s Smart Enterprise Processes (SEPSM) framework, its unique science of process combined with deep domain expertise in multiple industry verticals, leads to superior business outcomes. Genpact’s Smart Decision Services deliver valuable business insights to its clients through targeted analytics, reengineering expertise, and advanced risk management. Making technology more intelligent by embedding it with process and data insights, Genpact also offers a wide variety of technology solutions for better business outcomes. For more information, visit www.genpact.com or www.headstrong.com. Follow Genpact on Twitter, Facebook and LinkedIn.

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For more information, contact:

Acky KamdarSenior Vice PresidentFinancial Markets SolutionAcky.kamdar@genpact.com

Or write to us at information@headstrong.com