The top-level BIS Committee on Payment and Market Infrastructure (CPMI) has analyzed the extent to which collateral-management providers are increasing their market presence in ways that may pose risk that could even rise to systemic magnitude. A major fear is that collateral optimization and transformation could create new interconnections, especially for custodian banks, that pose new payment-and-settlement risk.  Transformation services that are opaque to markets or illiquid under stress are also cited as a macroprudential issue.  This report is a snapshot which concludes that much uncertainty in this area remains to be resolved as markets adjust to an array of new rules that could exacerbate shortages in high-quality assets. Its detailed discussion of the benefits of collateral management and, perhaps, also of transformation signal that global regulators do not intend to forestall these activities as shortages loom.  However, the scope of risks also identified and the remedies sketched out to address them creates a road map regulators will also follow if industry practice does not meet these expectations. 

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