Finadium releases counterparty default indemnification report
01 June 2012 Massachusetts
Image: Shutterstock
Securities and investment research firm Finadium has released a research report on the future of counterparty default indemnification in securities lending programmes as new regulations in the US and Europe threaten indemnification’s position as a free offering.
Beneficial owners, such as pension plans and mutual funds, consider counterparty default or borrower indemnification to be an important part of their securities lending programmes, according to Finadium.
But regulatory initiatives that are designed to reduce risk in the banking sector are threating the future of counterparty default indemnification.
Finadium said that Basel III’s recommendations on leverage and capital usage could negatively affect the indemnification practice if accounting for indemnification pushes banks above required ratio levels.
Similarly, provisions of the US Dodd-Frank Act could constrain indemnification if accounting standards are set unfavourably, according to Finadium.
Finadium’s research report evaluates regulatory changes that could affect indemnification for US, European and global agency securities lending providers.
It concludes with ideas on quantifying the value of indemnification for both service providers and beneficial owners.
The research report is aimed at asset holders participating in the securities lending market and their legal advisors, and securities lending agents, prime brokers, regulators and hedge funds that rely on short selling.
Beneficial owners, such as pension plans and mutual funds, consider counterparty default or borrower indemnification to be an important part of their securities lending programmes, according to Finadium.
But regulatory initiatives that are designed to reduce risk in the banking sector are threating the future of counterparty default indemnification.
Finadium said that Basel III’s recommendations on leverage and capital usage could negatively affect the indemnification practice if accounting for indemnification pushes banks above required ratio levels.
Similarly, provisions of the US Dodd-Frank Act could constrain indemnification if accounting standards are set unfavourably, according to Finadium.
Finadium’s research report evaluates regulatory changes that could affect indemnification for US, European and global agency securities lending providers.
It concludes with ideas on quantifying the value of indemnification for both service providers and beneficial owners.
The research report is aimed at asset holders participating in the securities lending market and their legal advisors, and securities lending agents, prime brokers, regulators and hedge funds that rely on short selling.
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