The bank plans to use Algorithmics' Algo Collateral (Sentry) product for the service. The system will be hosted and delivered via IBM's global services data centres in a 'pay as you go' manner.

A spokesperson for the bank says: "To provide the functionality required for multi-level engagements, we required 'best-of-breed' collateral management software and a stable, reliable and fast network, with the processing infrastructure to deliver it."

He adds that the initiative will make 'big bank' collateral services available to a far wider range of users.

Demand for dedicated, in-house collateral management systems is estimated to grow from $54.5 million in 2000 to reach US $134 million in 2005, according to Meridien Research. The majority of these expenditures would result from application purchases by the world's 400 largest banks and financial institutions. The first customer for the joint Algorithmics-IBM collateral management service says its initiative will lessen the need for similar investments by thousands of middle-tier banks, asset managers and corporates worldwide.

"Our client has moved quickly to fill the growing need for a range of collateral management service levels, from initially providing the functionality of Algo Collateral (Sentry), to delivering a more extensive service that sees them making collateral calls, monitoring agreements, including valuation and facilitating movement of collateral with counterparties, etc. - in effect offering the benefits of a full-scale collateral programme at lower costs through a utility model," says Michael Zerbs, chief operating officer, Algorithmics.