Securities lending should be part of global liquidity hub - Kurt Salmon
25 August 2011 London
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Securities lending and repo desks should be part of a global liquidity hub for lenders, wrote Kurt Salmon.
The consultancy firm notes that Basel III regulations will increase the costs of securities financing activity, requiring higher capital buffers and haircuts as well as more accurate measures of counterparty risk exposure.
Meanwhile, regulations will also increase demand for highly liquid or AAA assets with priority given to high-liquid assets on balance sheets.
"Borrowers decrease cash and increase equity collateral impacting the global exposure of the institution," wrote Kurt Salmon, adding that as a consequence, it becomes strategic for market participants to re-design in-house or outsourced collateral management processes.
Meanwhile, the number of agents providing automated securities lending and borrowing solutions is increasing, confirming the strong interest of the market in services such as facilitating real-time transactions, collateral monitoring and optimising costs while mitigating risks, the consultancy firm adds.
The consultancy firm notes that Basel III regulations will increase the costs of securities financing activity, requiring higher capital buffers and haircuts as well as more accurate measures of counterparty risk exposure.
Meanwhile, regulations will also increase demand for highly liquid or AAA assets with priority given to high-liquid assets on balance sheets.
"Borrowers decrease cash and increase equity collateral impacting the global exposure of the institution," wrote Kurt Salmon, adding that as a consequence, it becomes strategic for market participants to re-design in-house or outsourced collateral management processes.
Meanwhile, the number of agents providing automated securities lending and borrowing solutions is increasing, confirming the strong interest of the market in services such as facilitating real-time transactions, collateral monitoring and optimising costs while mitigating risks, the consultancy firm adds.
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