1. + Collateral Management Summary “ Making Great Ideas Become Reality”

2. + 2 What is Collateral Management At a high level, collateral management is the function responsible for reducing credit risk In unsecured financial transactions. Collateral has been used for hundreds of years to provide security against the possibility of payment default by the opposing party (or parties) In a trade. In the modern banking industry collateral is used most prevalently as bilateral Insurance in over the counter (OTC) financial transactions. However, collateral management has evolved rapidly in the last 20 years with increasing use of new technologies, competitive pressures in the institutional finance industry and heightened counter party risk from the wide use of derivatives, securitization of asset pools and leverage. As a result, collateral management now encompasses multiple complex and interrelated functions, including repos, tri-party / multilateral collateral, collateral outsourcing, collateral arbitrage, collateral tax treatment, cross-border collaterization, credit risk, counter party credit limits and enhanced legal protection using ISDA collateral agreements. Collateral management has significantly grown in importance during the past few years. Once viewed as a support function, it is now in the forefront because of the failure of several high profile financial institutions and investment banks. All financial institutions are now more aware and concerned of the risks they face and tighter and stricter regulations required to demonstrate control of their own and their clients’ assets.

3. + 3 CMA Understands your Needs In response to market changes and new legislative mandates, financial institutions want to evaluate their current collateral activities, leverage current strategic initiatives, and be able to create an industry leading collateral solution for their clients across product and business lines. A new operating model will require fundamental changes to collateral management’s organisational structure, systems, processes, and people/skill sets. We understand that a financial institutions’ primary objective for this type of project includes developing a leading collateral services strategy taking into account:  Collateral management can be manually intensive, time-consuming and expensive/  Need to achieve a consolidated view of positions across the bank.  Current offerings, capabilities, organizational structure and potential linkages among collateral, repurchase agreements and securities lending.  Ensure liquidity levels are maintained and optimized.  The regulatory environment and competitive offerings.  Potential partnerships and acquisitions as a catalyst to support the strategy.  Projected financial scenarios as well as capital and risk implications of potential service offerings. The primary output of this engagement will include options and recommendations around specific collateral opportunities and product offerings. This project should also recommend an execution approach as well as highlight potential risks to proposed opportunities.

4. + 4 CMA View Point Our perspective and experience Banks have been investing in collateral management improvements over the past two years as the credit crisis exposed serious deficiencies in their collateral management processes. The new regulatory regime has hastened this investment. CMA has advised several clients who are transforming their collateral management offerings as well as firms who are considering developing new collateral offerings. Based on our experience, successful collateral management efforts focus on the following key factors:  Offering a full suite of collateral optimization and financing options - Collateral transformation from ineligible to eligible assets (repo, stock lending, etc.) - Optimization of a client’s collateral based on collateral composition, clearing facility requirements and financing costs  Providing cross - asset capabilities - Cross-asset margining, margin netting, and settlement netting - Support for multiple approaches to calculate client’s credit risk exposure for different divisions asset classes - Fast, flexible reporting infrastructure - Client reporting to include at least real-time margin and collateral performance - Regulatory reporting to provide required reports and respond to ad hoc requests - Data and application infrastructure to deliver comprehensive data quickly and accurately  Developing a single, global inventory management system - Proactive inventory management - Real-time monitoring of incoming net collateral and its accurate distribution back to open exposures - Fast, straight-through transaction processing to support client trading frequency (may require integration with clearing broker, CCP, and client to comply with intra-margin related regulation) - Evidence of compliance with terms of CSAs, ISDAs, etc.  Establishing strong governance supported by comprehensive controls - Cross-functional / cross-asset governance to include risk management, collateral management, finance and treasury - Specific ownership of end-to-end procedures

5. + 5 How CMA can Help CMA resources have years of practical experience in Securities Finance and Collateral Management. We have worked within the Securities Finance department of many financial Institutions and you can benefit from our experience. Also, we cha help you realize the benefits of the new regulatory landscape to to profit from these changes. CMA has a strong understanding of the challenges of Collateral Optimization. We can help you create and deliver a collateral management strategy quickly and effectively by reviewing business processes throughout the financial institution. CMA can: Ensure liquidity levels are maintained and optimized. Ensure you have a commanding view of company assets as well as clients’ assets. Establish benchmarks to measure system performance, capacity and weaknesses. Recommend the technology around collateral that is needed to stay compliant, control risk and reduce costs. Common Challenges: We often see the top three collateral challenges for banks: Inadequate reference data quality Entrenched ‘business silo’ based collateral operating models Inadequate technology Most financial institutions have determined that they cannot wait to see the collateral implications of future regulatory requirements (Dodd-Frank etc.) and have decided that they must act now. As a result, we are seeing big impacts across a variety of financial functions: Risk functions are seeking more transparency into collateral holdings to better calculate exposure. Finance functions do not have the tools or the data to produce “collateral P&L” reports. New regulatory reporting is anticipated to become a significant cost requiring additional resources. Legal functions face a huge challenge renewing and renegotiating agreements and CSAs.