Last year, Toyota Financial Services (TFS) transformed its collateral-exchange procedure with 23 bank counterparties, which used to take five days at the end of the month, to meet a new two-hour daily processing requirement. The effort took seven months, five months less than expected, and an investment of only $100,000, which was 50% under budget.

With these changes, TFS, a wholly owned subsidiary of Toyota Motor, eliminated $1 billion in unsecured counterparty risk exposure and saved more than $100 million via lower funding costs, while also avoiding the use of credit default swaps and decreasing its credit value adjustments.

"The way our monthly [credit support annex agreements] were designed, there were cushions within them," says Nishant Rohatgi, treasury business solutions manager at TFS. "Because of our daily interactions, we have removed those credit thresholds, so now we have very little unsecured exposure in the portfolio."

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