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Overview

The Framesoft Contract Repository (FCR) is a dynamic application for Legal, Documentation, Credit and Treasury functions. It enables financial institutions engaged in OTC Derivatives; REPO and Security Lending transactions to maximize the value of all information contained within Master Agreements, such as close-out nettings provisions and associated Collateral Arrangements.

By translating complex yet qualitative information into centrally managed, usable, referenceable data, FCR will accurately generate the fundamental parameters for netting, both enhanced Credit Line Management and Regulatory Capital Relief. In this way, FCR facilitates sound management of Credit, Legal and Operational Risks for Legal, Documentation and Credit Risk functions across institutions.

Framesoft Contract Repository (FCR) already helps leading Banks and Security Houses to manage and evaluate information on thousands of Master and Collateral Agreements globally, whilst also taking account of multi branch relationships between both parties, products traded, and jurisdictions relevant for determining the “Nettability” of transactions.

The Framesoft Contract Repository (FCR) is an integral part of Framesoft’s Contract Management Suite.

FCR allows companies to gain control of all contracts and associated privileges & obligations. With Framesoft Contract Management, all corporate professionals dealing with mission critical contract documents have immediate access and visibility into contracts across the enterprise, resulting in elimination of operational risks, acceleration of processes, instant management control and compliance with guidelines and regulatory requirements. Even external parties may be fully integrated in all relevant steps of the workflow associated with mission critical contracts.

These advantages are derived from a fully integrated set of applications combined in the Framesoft Contract Management Suite, covering the complete lifecycle of any contract or other business document:

  • Automatic Generation of documentation such as first draft, execution copy, etc.
  • Secure Negotiation and Collaboration via Internet or Intranet
  • Management Reporting regarding status and results of negotiation
  • Filing, Archiving, Retrieval and Distribution

The Business Driver

As trading volumes increase and firms both reach their credit limits and increase counterparty exposure and therefore credit risk, the need to collateralize their activities becomes increasingly important. Coupled with the growth in numbers and type of trading counterparties, this need to collateralize to free up trading lines and reduce exposure becomes critical.

The credit risk mitigation achieved by master and collateral agreements delivers two key business benefits, namely, the opportunity for enhanced credit line management and the potential for obtaining regulatory capital relief. Such relief can be secured by the firm, through having lower exposures to counterparties and thus reducing capital burdens imposed by regulators.

The further reduction of counterparty exposures through collateralization and the potential reduction of actual loss upon default, through legally enforceable close-out netting provisions, are clearly beneficial. However, these techniques, whilst mitigating one form of risk, introduce two other major types of risk: Legal Risk and Operational Risk. In a growing collateralization market, these risks take on new significance. Moreover, the Basel Capital Accord II actively proposes the introduction of capital charges for less than robust management of these risks.

Put simply, the full benefits of mitigated credit risk in today’s regulatory environment can only be realized if legal and operational risks are also managed successfully. Framesoft Contract Repository (FCR) does exactly this.

As the market grows, the need to manage agreements centrally and the ability to scale up and adapt to changing legal and operational requirements is critical. FCR performs these requisite functions and more.

Functionality & Key Benefits

The functional elements of Framesoft Contract Repository (FCR) are all designed to enable the successful management and administration of master and collateral agreements from a central point.

This centralised approach to document and data management will become essential in ensuring the execution of truly firm-wide credit risk management strategies, given the changing emphases of regulatory capital allocation regimes. As agreement information is effectively transformed into useable data items, adaptability, flexibility and scalability are achieved with consummate ease.

FCR builds on these base functional characteristics to improve both communications between front and middle office functions and more specifically, provide the fundamental rules for firm-wide, accurate netting processes. This power and flexibility creates a key advantage over incumbent, conventional contract management systems, typically derived from desktop database applications or even spread sheet based programs. These distributed, hard-to-control, inflexible and therefore unwieldy tactical applications simply will not be able to provide the quality of data management required for the critical reporting and netting process requirements placed upon firms by regulators for proper operational risk control.

FCR not only provides the necessary flexibility, scalability and quality of data management, but goes on to provide the deliverables of key reporting structures and netting processes themselves.

The functionality of FCR is rich and unique. It includes, but is not limited to, the following key processes and actions:

  • Dynamic Property Set-up
    FCR is able to build and manage additional data types dynamically. This functionality provides the flexibility to handle any new legal, contractual,   counterparty type, product or regulatory requirements. This has proven invaluable to clients, many of whom have needed to respond to changing capital adequacy qualifications by inserting “early termination” clauses across their agreements. The freedom of free configurability of data types is of enormous benefit, yet represents only one piece of functionality.
  • Netting Data Management
    The specification of contract, counterparty and product information, which are of relevance to the firm’s regulatory or internal credit line netting conventions. With FCR, it is possible to highlight all clauses, all attributes of a counterparty and all characteristics and related facets of a traded product as to their requirement to be identified and valued in the netting process. Building on the function above, FCR utilizes its own netting algorithm to generate netting data, which describes empirically, which combinations of counterparty (down to branch / city level per jurisdiction) and traded products are nettable. This is a unique function to Framesoft Contract Repository. The application can determine the rules against which netting may be permitted. These tables of netting information are also viewable as defined reports or on-line, across the firm (access permitting).
  • Netting Analyzer
    The Framesoft Netting Analyzer provides the opportunity of Real-time netting evaluations of single agreements or groups of agreements.
  • Document Negotiation & Generation
    Framesoft Contract Repository (FCR) was developed aiming to support the whole lifecycle of any kind of agreement:
    • Starting off with a draft agreements generated based on XML templates in PDF or Microsoft Word (rtf) format.
    • Capturing of structured data items for any kind of agreement gets easy using the FCR‘s data model designed for current &  future requirements offering unlimited expandability with regard to agreement types and clauses.
    • FCR can use its core data relating to jurisdictions, including counterparty data, netting provisions and products to be covered under the agreement, to generate schedules from pre-defined templates and clause wording.
    • Tight integration with Framesoft Document Management System (FDM) for archiving of execution copies as well as any king of associated documentation.
  • Workflow Engine
    As FCR supports the whole lifecycle of a document a comprehensive workflow engine for approval, negotiation, e.g. is an integrative part of the FCR capabilities. 
  • Interfaces & Communication 
    The ability to interface with in-house or third party applications, enabling the provision of agreement and netting information to all relevant business units or integration to legacy system delivering e.g. counterparty data or rating information.
  • Search & Reporting
    FCR has extensive user definable reporting capabilities.
  • Customization
    FCR can be customized to the company’s specific needs.
  • User Administration
    Access rights and user privileges are fully configurable within FCR.
    • Auto-Population
      Framesoft can achieve efficient data migration and data maintenance from disparate or single systems, through interface development:
      Counterparty details, from contact to branch and city codes
    • Complete clause build-up and full contract data
    • Legal opinions for relevant jurisdictions
    • Tradable product data, derived from the agreement data
    • Bilateral collateral arrangements (defined and maintained as either Security Interest or Title Transfer types)

The auto-population of FCR can also generate audit trail information relating to data entry, approval and release, creating further security in management of the data.