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Tracking $5 Trillion in Assets

John AckleyJohn Ackley, vice president of Treasury Services, thinks of 2008 as a watershed year for the Collateral Management System (CMS), operated by Philadelphia's Treasury Services on behalf of the entire Federal Reserve System. By year-end 2008, the CMS was tracking assets with more than $5 trillion in original par value and a collateral value of $2.5 trillion.

The CMS team in Philadelphia completed a major overhaul of the system in 2006, and Ackley said that the CMS demonstrated its robustness in 2008. "We really didn't have to change the CMS at all, which was a testament to its quality and flexibility." As the Federal Reserve added new lending facilities, broadened collateral categories, and even added nonbank institutions to those with access to the window, the CMS kept up with the changes.

Ackley noted that throughout a volatile year, the CMS team maintained steady leadership and oversight to meet the requirements of the credit and risk management community. As new issues came up about collateral procedures or processes, team members, including Ackley, were taking calls and answering questions at all hours. In 2008, Ackley and his team, supported by Marie Tkaczyk and her team in Information Technology Services, introduced several improvements. One enhancement was to automate the handling of "borrower-in-custody" collateral, usually loan portfolios that a bank keeps on site so it can service the loans. "Back in the day, a bank would show us a stack of computer paper, two inches thick, with loan information. We would determine the collateral value and enter the total for the group deposit. Now we have the ability to look at each loan, with greater granularity, so the institution can receive a more precise collateral value," said Ackley.

The team also automated monthly reporting to depository institutions of the value of the collateral they pledged to the Fed. Collateral pricing was also improved, with more frequent updates from the National Book Entry System for Treasury securities and from the Depository Trust Company for other securities. In early 2009, the CMS began providing daily updates to pricing of other forms of collateral.

Ackley says the goal is to keep refining the system so that when intraday payment system risk (PSR ) rules go into effect in two years, the CMS will be able to tell Federal Reserve Banks and their depository institutions the collateral value of the assets pledged at any given moment.