Northern Trust, the US banking group, said it is enhancing collateral and liquidity management solutions so clients can reconcile the sometimes clashing impact of new global standards.

Northern Trust, the Chicago-headquartered firm, has announced it is enhancing its collateral management and liquidity solutions so clients can meet requirements of sometimes conflicting new regulations in the US, Europe and elsewhere.

Under the Dodd-Frank regulations in the US and EMIR guidelines in the European Union, market players require considerable amounts of eligible collateral and need liquidity, but some rules, such as Basel III capital standards, limit levels of liquidity and collateral in the market, the bank says. (Editor's note: it is not unusual these days for one set of rules to conflict with another.)

While not apparently a direct matter for wealth managers, the regulatory regimes created by Dodd-Frank and the European rules on reporting derivative transactions could, so experts say, create new costs that will ultimately be borne by end-users of the financial system, including wealth management clients.

“The intersection of these regulations will impact institutional investors in a number of ways, particularly increasing the need for liquidity and, over the longer term, creating a collateral squeeze,” said Fiona Horsewill, head of product and strategy for Europe, Middle East and Africa.        

The solution by Northern Trust will enable clients to hold their assets in a transparent account structure, even if at the time they are being used for collateral for clearing derivative positions, the bank said in a statement.

Clients will be able to view their entire asset inventory and track each asset’s location for assets held in custody with Northern Trust and outside Northern Trust, access eligible collateral for initial margin requirements, review and evaluate counter-party exposure, and monitor potential future liquidity needs, the company said.