ISLA: Lending opportunities are changing
15 February 2019 London
Image: Shutterstock
The significant rise in the lending of government bonds or high-quality liquid assets (HQLA), means that almost half of global securities on-loan today are HQLA assets, according to Andy Dyson, CEO of International Securities Lending Association (ISLA).
Dyson said this following the Association of the Luxembourg Fund Industry (ALFI) and ISLA’s briefing in Luxembourg.
He remarked: “While we understand that UCITS can see restrictions around their ability to participate in term HQLA business, the growth in this area of the market is a key driver for change.”
Themes of flexibility and innovation beyond 2019 occurred at the briefing and Dyson explained that lenders have access to an expanding ‘toolbox’ of ideas and products.
This includes alternative routes to market such as pledge collateral structures and central clearing.
Dyson cited that discussions from the briefing revealed that there is still some way to go for the buy-side community to fully embrace central clearing.
Additionally, he added that it does present an interesting alternative to existing bilateral business.
According to Dyson, both pledge structures and central clearing present different risk-weighted asset profiles for borrowers, and as such can facilitate a greater flow of business opportunity for lenders.
He commented: “In looking back, it was clear to me that there is much innovation and product development within the agent community and while some of this is being driven by regulatory imperatives such as Securities Financing Transaction Regulation and Basel III, they are creating real revenue opportunities for their clients.”
Dyson said this following the Association of the Luxembourg Fund Industry (ALFI) and ISLA’s briefing in Luxembourg.
He remarked: “While we understand that UCITS can see restrictions around their ability to participate in term HQLA business, the growth in this area of the market is a key driver for change.”
Themes of flexibility and innovation beyond 2019 occurred at the briefing and Dyson explained that lenders have access to an expanding ‘toolbox’ of ideas and products.
This includes alternative routes to market such as pledge collateral structures and central clearing.
Dyson cited that discussions from the briefing revealed that there is still some way to go for the buy-side community to fully embrace central clearing.
Additionally, he added that it does present an interesting alternative to existing bilateral business.
According to Dyson, both pledge structures and central clearing present different risk-weighted asset profiles for borrowers, and as such can facilitate a greater flow of business opportunity for lenders.
He commented: “In looking back, it was clear to me that there is much innovation and product development within the agent community and while some of this is being driven by regulatory imperatives such as Securities Financing Transaction Regulation and Basel III, they are creating real revenue opportunities for their clients.”
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