Gil, as the Founder & CEO of Capitolis, what’s your vision for the company and how are you working with the world’s leading financial institutions to deliver on that vision?
My vision for Capitolis is to address a growing demand and necessity for banks and the entire market to better manage financial resources. With increasing regulations and costs of operating businesses, the efficient management of bank resources has begun to matter more and more. This is a one-directional trend, and we see the path to banks only needing to add more financial resources as a result.
Capitolis aims to partner with the industry to help them solve this growing challenge. Our solutions help banks and other market participants to understand where resources are being dedicated, and then propose opportunities to optimize the use of these resources. The positive impact of optimizing resources will be felt across the entire financial market.
Ben, as Head of the Portfolio Optimization business, please tell us a little about the portfolio of optimization products that Capitolis currently offers and what they are designed to do.
We tend to think of our solutions as helping our clients manage financial resources across three main areas: capital costs, funding costs, and other risks stemming from derivatives portfolios.
Our capital optimization solutions help banks manage capital costs associated with RWA or Leverage Ratio requirements, typically arising from regulatory requirements such as the Basel Committee’s SA-CCR, GSIB capital buffer add-ons, advanced models of calculating Risk-Weighted Assets, and other similar measures.
Our funding solutions are designed to manage and optimize IM and VM requirements, ranging from bilateral margin requirements to cleared margin requirements.
We also offer solutions that help banks manage their derivatives portfolios in other ways, such as our Settlement Risk Optimization which reduces the potential for impacts of settlement failures.
One of the reasons we have had success in our business is our willingness to listen to clients and create innovative solutions to address a growing number of needs, and doing so with a technology-first, scale-based mindset.
One of the reasons we have had success in our business is our willingness to listen to clients and create innovative solutions to address their needs
What types of firms are you providing these services for?
The optimization space has traditionally catered to the needs and requirements of the largest global banks, as they have the largest and most complex derivatives portfolios. However, with tightening of resources and increasing regulation, everyone is affected. Because of this, we are providing optimization solutions to banks, buy-side, and corporates.
With our focus on technology and lowering the operational lift involved in optimization, Capitolis is increasingly opening the door for financial institutions of all types and sizes
How does Capitolis help clients optimize their financial resources?
We regularly bring together a network of financial institutions to participate in optimization to help manage financial resources. There is often a wide range of objectives that the participants want to optimize (think SA-CCR on one end and CCAR tallest trees on the other); we are experts at finding solutions that deliver a benefit to all participants.
To do this with any sort of reliability and scalability, we have adopted a technology-first approach to delivering these optimizations. Our light-touch process is essential to bringing more banks and other institutions to the table, and promotes the scale needed to optimize against a growing number of counterparties.
Evelina you head up Business Development. What plans does Capitolis have for expanding the size of its participating network to drive more value for all participants?
Growth in our business has traditionally come from the expansion of our network to include more banks in the largest runs. These tended to be the largest financial institutions with the biggest exposures. With our focus on technology and lowering the operational lift involved in optimization, we are increasingly opening the door for financial institutions of all types and sizes – e,g. banks with regional focus in local markets, buy-side, and corporates.