Assessor Resource

FNSFMK508A
Monitor and process collateral

Assessment tool

Version 1.0
Issue Date: April 2024


This unit applies to a job roles involving collateral management in the financial markets sector.

This unit describes the performance outcomes, skills and knowledge required to monitor collateral activity, process agreements and manage disputes as required.

This unit may apply to job roles subject to licensing, legislative, regulatory or certification requirements so Commonwealth, State or Territory requirements should be confirmed with the relevant body.

You may want to include more information here about the target group and the purpose of the assessments (eg formative, summative, recognition)

Employability Skills

This unit contains employability skills.



Evidence Required

List the assessment methods to be used and the context and resources required for assessment. Copy and paste the relevant sections from the evidence guide below and then re-write these in plain English.

The Evidence Guide provides advice on assessment and must be read in conjunction with the performance criteria, required skills and knowledge, range statement and the Assessment Guidelines for the Training Package.

Overview of assessment

Critical aspects for assessment and evidence required to demonstrate competency in this unit

Evidence of the ability to:

manage collateral agreements and transactions and enter details in organisational systems

evaluate and adjust financial positions

interpret and comply with organisational trading rules and limits.

Context of and specific resources for assessment

Assessment must ensure:

competency is demonstrated in the context of the financial services work environment and conditions specified in the range statement either in a relevant workplace or a closely simulated work environment

access to and the use of a range of common office equipment, technology, software and consumables

access to financial markets product information.

Method of assessment

A range of assessment methods should be used to assess practical skills and knowledge. The following examples, in combination, are appropriate for this unit:

evaluating an integrated activity which combines the elements of competency for the unit or a cluster of related units of competency

verbal or written questioning on underpinning knowledge and skills

setting and reviewing business simulations or scenarios

accessing and validating third party reports.

Guidance information for assessment

Submission Requirements

List each assessment task's title, type (eg project, observation/demonstration, essay, assingnment, checklist) and due date here

Assessment task 1: [title]      Due date:

(add new lines for each of the assessment tasks)

Assessment Tasks

Copy and paste from the following data to produce each assessment task. Write these in plain English and spell out how, when and where the task is to be carried out, under what conditions, and what resources are needed. Include guidelines about how well the candidate has to perform a task for it to be judged satisfactory.

Required skills

well-developed communication skills to:

determine and confirm counterparty and organisational requirements, using questioning and active listening as required

liaise with team members and peers, share information, listen and understand

use language and concepts appropriate to cultural differences

numeracy and IT skills to:

deal with collateral transactions and processes

use internet information

highly developed research and analysis skills for:

accessing, interpreting and managing complex information

identifying gaps in information and gathering necessary information from alternative sources

well-developed literacy skills to:

read and interpret market information

identify economic environmental factors which affect financial services and markets

judgement skills for making financial decisions in complex situations and meeting organisational policies and procedures

organisational skills, including the ability to:

plan and sequence own work

work effectively in a constantly changing environment

self-management skills for complying with ethical, legal and procedural requirements

Required knowledge

understanding of the economic environment, including:

characteristics and impacts of economic and business cycles

government monetary and fiscal policies

interest rates, exchange rates and inflation

the range of market collateral products

organisational requirements relating to collateral agreements

financial risk analysis techniques

financial markets report structures and characteristics

organisational transaction limits

The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

A credit support document (CSD) is:

a document setting out the terms and conditions under which collateralisation will occur.

Market to market (MTM) is:

the current market value of a single trade or trade portfolio.

NB A minimum transfer amount for single trades is a minimum amount that can be called and transferred to avoid costs of small transfers.

Netting:

permits individual trade values to be aggregated to provide a single exposure that should be included in an agreement so it is enforceable.

Organisational guidelines and credit limits may include:

business rules of the exchange

credit limit

deal limit

industry association codes of conduct

loss limit

organisational codes of conduct

relevant regulations and legislation.

Financial products may include:

cash

bonds

derivatives:

forward rate agreements

swaps

options

futures

foreign exchange

securities:

debt

equity.

Transaction details may include:

consideration

counterparty

face value

maturity date

price

start date

trade date.

Non-cash collateral valuation percentages (sometimes called a 'haircut') apply to:

bonds or other forms of collateral subject to changing credit rating or liquidity.

Threshold amounts are:

predetermined amounts of unsecured credit exposure that an organisation and counterparty are prepared to accept, set at levels that maximise credit risk mitigation.

A break clause:

permits either party to the collateral agreement to break the swap on agreed future dates and the MTM value is exchanged.

Disputes may arise due to:

missing trades

unreconciled trade data

variations in data used for valuations

yields calculated at different times or from different sources.

Copy and paste from the following performance criteria to create an observation checklist for each task. When you have finished writing your assessment tool every one of these must have been addressed, preferably several times in a variety of contexts. To ensure this occurs download the assessment matrix for the unit; enter each assessment task as a column header and place check marks against each performance criteria that task addresses.

Observation Checklist

Tasks to be observed according to workplace/college/TAFE policy and procedures, relevant legislation and Codes of Practice Yes No Comments/feedback
Terms and conditions for a credit support document (CSD) are negotiated with a predicted market to market (MTM) position 
Netting of trades is agreed between the parties to facilitate the collateral agreement, and signed off by the legal department. 
The credit rating of the collateral counterparty is assessed using external ratings and own organisational guidelines so the agreed Credit Support Annexe (CSA) terms reflect the appetite for counterparty risk and limits in the CSD 
A complete a legally binding collateral agreement is drafted, authorised and processed in accordance with organisational policies and procedures 
The net MTM value of the trades covered by the CSD is used to calculate the collateral margining activity. 
Margin calls are initiated when the terms of the CSA dictate 
Market values for non-cash collateral such as debt is monitored and updated daily, checking that any cuts in valuations are applied in line with agreed framework 
Derivative credit exposures on long-term and short-term deals are identified and updated on the organisational credit management system 
Threshold amounts and monitored to determine options to use a break clause if necessary 
Collateral deals are negotiated and replaced when a break clause has been invoked 
Call and return amounts are processed promptly and accurately 
Segregation of roles is observed, e.g. margining team do not manage collateral settlements 
Differences in valuations are identified and escalated to the correct stream. 
Portfolios are checked, valued and reconciled on a regular basis to ensure collateral management data is current and valid 
Disputes are dealt with according to organisational policy and procedures 
Unresolved disputes or defaults are documented and referred to appropriate personnel where required 
Non-settlement or fails of agreed collateral are investigated and escalated to the appropriate risk stream in line with agreed Service Level Agreements (SLAs). 

Forms

Assessment Cover Sheet

FNSFMK508A - Monitor and process collateral
Assessment task 1: [title]

Student name:

Student ID:

I declare that the assessment tasks submitted for this unit are my own work.

Student signature:

Result: Competent Not yet competent

Feedback to student

 

 

 

 

 

 

 

 

Assessor name:

Signature:

Date:

Assessment Record Sheet

FNSFMK508A - Monitor and process collateral

Student name:

Student ID:

Assessment task 1: [title] Result: Competent Not yet competent

(add lines for each task)

Feedback to student:

 

 

 

 

 

 

 

 

Overall assessment result: Competent Not yet competent

Assessor name:

Signature:

Date:

Student signature:

Date: