We will stop there, because the purpose of this note is to illustrate the type of inconsistencies that are emerging. The consequences of such inconsistencies are considerable. Given that a significant portion of OTC derivatives activity continues to be traded bilaterally, even after the full approval of the clearing mandate, inconsistent practices between the bilateral world and the cleared world are likely to lead to market fragmentation, a lack of fungibility between cleared and uncleaned products (with all the consequences for risk management) and erroneous incentives in this area. of exploitation. $$ textbf {Example of guarantee parameters related to rating} $$ As guarantee contracts are often bilateral, guarantees must be returned or reserved for the other party as soon as the risk decreases. Booking and returning guarantees are not much different. Collateral management began in the 1980s, when Bankers Trust and Salomon Brothers took guarantees against credit risks. There were no legal standards, and most calculations were done manually in calculation tables. Derivative liabilities hedging was widely used in the early 1990s. Standardization began in 1994 through the first ISDA documentation. [1] As already stated, a bilateral treaty has, by definition, reciprocal obligations. That is what distinguishes it from a unilateral treaty. The practice of providing collateral in exchange for a loan has long been part of the business-to-business lending process.

With an increasing number of credit institutions and the introduction of new technologies, the level of collateral management has increased.