eSecLending updates best practice guide
30 January 2018 London
Image: Shutterstock
eSecLending has updated its securities lending best practice guide to reflect the rise of US non-cash collateral, term trading, and peer-to-peer lending, along with the rising costs of indemnification.
The financial services provider’s third edition, available from today, aims to help market stay current on developments in order to optimise their programmes for both risk and return in the modern market landscape.
The guide outlines the fact that non-cash collateral is becoming more prevalent for US-domiciled lenders as some borrowers prefer to offer non-cash for balance sheet reasons.
Term transactions are becoming more prevalent globally due to because of benefits to borrower balance sheets.
At the same time, according to eSec, indemnification, costs are rising for agent lenders based on Dodd Frank and Basel III requirements, leading to potentially revised pricing for lenders and/or changes to program trading patterns.
The guide also acknowledges that it is more important than ever for lenders to continue to evaluate their securities lending programs and establish whether or not changes should be made, based on the evolving landscape.
eSecLending’s guide was first published in 2012, and then updated in 2015.
Commenting on the new guide’s launch, eSecLending said: “This paper will provide both education and guidance, but it is not intended to be a lengthy or highly technical publication.”
“Rather, it is a basic explanation, with practical guidance notes incorporated, of the market mechanics, programme structures, associated risks and risk mitigation and the lending program approval process, including how programmes are overseen by those responsible for securities lending at institutional investors.”
The financial services provider’s third edition, available from today, aims to help market stay current on developments in order to optimise their programmes for both risk and return in the modern market landscape.
The guide outlines the fact that non-cash collateral is becoming more prevalent for US-domiciled lenders as some borrowers prefer to offer non-cash for balance sheet reasons.
Term transactions are becoming more prevalent globally due to because of benefits to borrower balance sheets.
At the same time, according to eSec, indemnification, costs are rising for agent lenders based on Dodd Frank and Basel III requirements, leading to potentially revised pricing for lenders and/or changes to program trading patterns.
The guide also acknowledges that it is more important than ever for lenders to continue to evaluate their securities lending programs and establish whether or not changes should be made, based on the evolving landscape.
eSecLending’s guide was first published in 2012, and then updated in 2015.
Commenting on the new guide’s launch, eSecLending said: “This paper will provide both education and guidance, but it is not intended to be a lengthy or highly technical publication.”
“Rather, it is a basic explanation, with practical guidance notes incorporated, of the market mechanics, programme structures, associated risks and risk mitigation and the lending program approval process, including how programmes are overseen by those responsible for securities lending at institutional investors.”
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