ACSDA General Assembly Casa Santo Domingo Antigua, Guatemala Wednesday, April 17, 2013 COLLATERAL MANAGEMENT SERVICES Presented by Monica Singer (Strate) on behalf of the Liquidity Alliance

Australia Brazil Europe Canada South Africa The Liquidity Alliance (LA) | 2 Liquidity Hub GO Imminent additional partners Implemented July 2013 November 2013 Europe October 2013 Implemented

Key Drivers Requiring Collateral 3 | 3 BASEL III Greater regulatory capital requirements; Bigger Liquid Asset Requirements; Credit Value Adjustments. CPSS/IOSCOSolvency II Increased capital adequacy requirements for Life Companies Local Regulations Dodd Frank, EMIR etc. Increased: Asset safety; Collateralisation. Asset safety Scarcity of cash as collateral; Limited high quality eligible assets Re-evaluation of qualifying securities Risk mitigation Strengthen Bi-lateral Risk Management G-20 Recommendations Increased Capital Requirements Increase Transparency Increased transparency; Guidelines on collateral management practices; C C C C Central Clearing Trade Repository C C

| 4 Opportunity for CSDs Validation/Eligibility Criteria Automatic Allocation Automatic Margin Calls Automatic Substitution Collateral Optimisation Reporting Haircuts Concentration Limits Buffers/Thresholds Minimum tradable amounts Eligibility Changes CSD BondsEquities Money Market Centralised management = lower costs and risk Multi-asset class Facilitate “Last Resort” Cash Collateral Calls

Motivation for CSD offering Tri-Party Collateral Management Services 5 | 5 A Central Securities Depository is: a trusted third-party, independent and self contained, of a different risk profile, neutral (never a counterpart to a trade), holder of sacrosanct dematerialised records for various asset classes available as collateral. Facilitates the processing of Corporate Actions and Capital Events

Different offices/ divisions/systems Different instruments Managed by different people, with different agendas Complex collateral relationships Current South African Collateral Market 6 Traders want the best results at the best price Risk managers want to minimise risk and keep the firm safe from loss Securities Treasury Lending Risk Credit Asset Management Unsecured Loans Over-The- Counter (OTC) Repos On Market Derivatives Securities Lending and Borrowing Bi-Lateral cash loans Secured loans Syndicated loans Collateral allocation must come from a central pool DEF ABC Many manual interventions (use of Excel is prolific) Issues exist around processing Corporate Actions in collateral substitutions

Tri-Party Collateral Solution Third Party Collateral Manager Bank Posting Collateral Tracking Collateral A tri-party system would be able to automatically and accurately: Regular collateral valuation Track all re-use of collateral. Provide daily reconciliation. Reduce exposure measure errors which will lower operational risk. Removing Internal and External Silos – enabling optimisation Centrally automating collateral management for the industry using a market-wide collateral pool enabling optimisation across all relationships Providing additional Asset Safety to investors, as assets are held directly in the CSD Tracking Collateral

Why Clearstream’s Liquidity Hub GO solution CSD continues to maintain the legal relationship with its customers; Collateral retained locally in the accounts of the underlying customers with the CSD; In a default or infrastructure interruption scenario, the perfection of collateral will always follow local rules and regulations; CSD becomes a sophisticated provider of collateral management services: assuming no principal risk Utilises white-labelled functionality independent of the CSD’s core settlement/custody systems; no contagion risk from the solution offering 24-hour service. | 8

Phased approach Phase 1 – using local dematerialised securities to collateralise local open financial exposures; Phase 2 – using foreign dematerialised securities to collateralise local open financial exposures; and Phase 3 – using local dematerialised securities to collateralise foreign open financial exposures. (Phases 2 and 3 in no order of priority) Benefit of the Liquidity Alliance will be exponential once phases 2 and 3 are implemented | 9

Benefits of the Liquidity Alliance (LA) Utilising a solution already successfully implemented and utilised by other CSDs; Clearstream’s experience in successful implementations in other markets; Sharing global insights, knowledge and experiences; Enabling cross-border collateral optimisation and collateral movements on a common platform; Economies of scale on required technology changes | 10

| 11 Thank you!