Magic Circle firm Allen & Overy has partnered with big four accountant Deloitte to create a service designed to help banks cope with tougher post-financial crisis regulations.
The service, named MarginMatrix, codifies the law in various jurisdictions and automates document drafting to help banks address new collateral requirements for over-the-counter derivatives which have not been centrally cleared.
Allen & Overy estimates that the rules will initially require major banks dealing with derivatives to provide around $10bn (£7bn) in additional margin, a process involving thousands of complex documents.
According to the firm, the system will cut down the time it takes to draft a document from three hours by a lawyer to three minutes. It says that this will reduce the time taken to manually handle 10,000 contracts from 15 years to 12 weeks.
The service, claimed to be the first major collaboration between an international firm and one of the big four accountancy firms, is also expected remove the need for clients to appoint and manage separate legal and technology providers in multiple regions.
The Basel Committee for Banking Supervision's new margin regulation was expected to come into force on 1 September, but the European Commission has warned that it will not be able to meet the deadline.
David Wakeling, derivatives partner at Allen & Overy, said the different speeds regulators in the EU and the US are moving at makes it very difficult for those participating in the derivatives market to manage.
He said: ‘We see MarginMatrix as a game changer for people operating in this space. It will relieve some of the pressure and also reduce the possibility of a non-compliant outcome.’
Wim Dejonghe (pictured), senior partner at Allen & Overy, said that the service was an ‘excellent example’ of the way the firm was responding to changing client needs.
‘We foster a culture of entrepreneurialism and calculated risk-taking, which enables our partners to generate and deliver market-leading initiatives like this one to solve the most complex legal problems for clients.’