IMN: the more things change
27 January 2015 San Francisco
Image: Shutterstock
There has been a significant shift towards the acceptance of new types of collateral in repo, according to a panel at the Beneficial Owners’ International Securities Lending and Collateral Management Conference in San Francisco.
The panel, which included LJ Jhangiani of BMO Asset Management, Tim Smollen of Deutsche Bank and Craig Starble of eSecLending, tackled the evolution of securities finance, finding that repo clients require a new level of customisation in the service they receive.
They now have up to half a dozen collateral sets each, per dealer, when only a decade ago they had three sets per dealer, meaning that agents must constantly review collateral guidelines.
The duration of repo trades also comes up, according to the panel, with regulations forcing dealers to now ask for terms of 120 days or more. One panellist said: “Our clients are dabbling in this.”
A later panel discussion on regulation repeated the concern that new capital rules are “creating a lot of havoc on the demand side”, as many broker-dealers are subsidiaries of banks that are subject to the likes of the US Dodd-Frank Act and Basel III.
Panellists including Gregory Lyons of the law firm Debevoise & Plimpton and Theresa Hajost of the US Securities and Exchange Commission said that upheaval on the buy side is affecting demand for beneficial owners’ securities.
Beneficial owners will also be hit on indemnification, which agent lenders now have to consider as a credit exposure, explained the panel.
The positive news to come out of regulatory reform is that 2014 heralded the implementation of many rules.
The panel noted that most banks and beneficial owners are aiming to comply with all rules as soon as possible, rather than the “somewhat illusory” 2019 phase in deadline that many new regulations carry.
The panel, which included LJ Jhangiani of BMO Asset Management, Tim Smollen of Deutsche Bank and Craig Starble of eSecLending, tackled the evolution of securities finance, finding that repo clients require a new level of customisation in the service they receive.
They now have up to half a dozen collateral sets each, per dealer, when only a decade ago they had three sets per dealer, meaning that agents must constantly review collateral guidelines.
The duration of repo trades also comes up, according to the panel, with regulations forcing dealers to now ask for terms of 120 days or more. One panellist said: “Our clients are dabbling in this.”
A later panel discussion on regulation repeated the concern that new capital rules are “creating a lot of havoc on the demand side”, as many broker-dealers are subsidiaries of banks that are subject to the likes of the US Dodd-Frank Act and Basel III.
Panellists including Gregory Lyons of the law firm Debevoise & Plimpton and Theresa Hajost of the US Securities and Exchange Commission said that upheaval on the buy side is affecting demand for beneficial owners’ securities.
Beneficial owners will also be hit on indemnification, which agent lenders now have to consider as a credit exposure, explained the panel.
The positive news to come out of regulatory reform is that 2014 heralded the implementation of many rules.
The panel noted that most banks and beneficial owners are aiming to comply with all rules as soon as possible, rather than the “somewhat illusory” 2019 phase in deadline that many new regulations carry.
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