€1.7 trillion securities on loan in 2014
17 April 2015 London
Image: Shutterstock
The International Securities Lending Association (ISLA) has found that €1.7 trillion of securities were on-loan globally as at 31 December 2014, drawn from an available lending pool of €12.5 trillion.
This represents a growth of some 18 percent in reported on-loan balances during 2014, according to the second edition of the ISLA's Securities Lending Report, which aims to provide policymakers with accurate industry statistics.
As of 31 December 2014, ISLA found that institutional investors such as pension funds, mutual funds and sovereign wealth funds, remained the largest participants in the securities lending market.
Banks’ securities lending, when acting as principal, represented 23 percent of the market, up from 18 percent in June 2014.
Fifty-two percent of all outstanding loans were of equities or exchange-traded funds, which was broadly the same as at 30 June.
The ISLA report has also shown that government bond lending represented 38 percent of the total global on-loan balances by year-end 2014, up from 35 percent at 30 June, with both the supply and demand to borrow government bonds increasing during 2014.
The report stated: “The split between non-cash and cash collateral received by lenders was broadly 55/45 with a clear and ongoing drift away from cash collateral.”
“In certain markets such as government bond lending this trend was more extreme with, for example, only 10 percent of loans of European government bonds being booked as cash collateral loans.”
From a regulatory point of view, the impact of prudential and derivatives reforms (in particular through Dodd-Frank in the US and Capital Requirements Directive IV and European Market Infrastructure Regulation in Europe) are having a “material impact” on the terms on which borrowers are prepared to do business, according to ISLA.
Some of the predicted trends towards the more efficient use of collateral through term non-cash collateralised structures, which support better liquidity coverage ratio calculations, are now being seen in practice within the data.
This represents a growth of some 18 percent in reported on-loan balances during 2014, according to the second edition of the ISLA's Securities Lending Report, which aims to provide policymakers with accurate industry statistics.
As of 31 December 2014, ISLA found that institutional investors such as pension funds, mutual funds and sovereign wealth funds, remained the largest participants in the securities lending market.
Banks’ securities lending, when acting as principal, represented 23 percent of the market, up from 18 percent in June 2014.
Fifty-two percent of all outstanding loans were of equities or exchange-traded funds, which was broadly the same as at 30 June.
The ISLA report has also shown that government bond lending represented 38 percent of the total global on-loan balances by year-end 2014, up from 35 percent at 30 June, with both the supply and demand to borrow government bonds increasing during 2014.
The report stated: “The split between non-cash and cash collateral received by lenders was broadly 55/45 with a clear and ongoing drift away from cash collateral.”
“In certain markets such as government bond lending this trend was more extreme with, for example, only 10 percent of loans of European government bonds being booked as cash collateral loans.”
From a regulatory point of view, the impact of prudential and derivatives reforms (in particular through Dodd-Frank in the US and Capital Requirements Directive IV and European Market Infrastructure Regulation in Europe) are having a “material impact” on the terms on which borrowers are prepared to do business, according to ISLA.
Some of the predicted trends towards the more efficient use of collateral through term non-cash collateralised structures, which support better liquidity coverage ratio calculations, are now being seen in practice within the data.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
