€2 billion lost revenue if FTT comes into play, warns ISLA
06 June 2013 London
Image: Shutterstock
ISLA has responded in full to the Financial Transaction Tax, with stern implications that the tax as proposed would “close down” the securities lending market.
The International Securities Lending Association pointed out typical positives of the market, such as it allowing long-term investors generating incremental returns on their securities portfolios, and providing important liquidity to the secondary markets for both bonds and equities.
But, it warned, “At least 65 percent of the European securities lending market would disappear as a result of the FTT,” adding that France and Germany would be the markets most impacted, and EU 11 government bonds the asset most impacted.
It noted that over €2 billion of revenues would be lost to long term investors, with close to €500 billion of Euro government bonds would be removed from the lending/ collateral markets.
Shorter dated transactions would be disproportionately impacted, increasing the risk of settlement fails by possibly as much as 100 percent, and securities lending fee levels would need to increase by over 400 percent just to maintain current revenue streams for long term institutional investors.
The International Securities Lending Association pointed out typical positives of the market, such as it allowing long-term investors generating incremental returns on their securities portfolios, and providing important liquidity to the secondary markets for both bonds and equities.
But, it warned, “At least 65 percent of the European securities lending market would disappear as a result of the FTT,” adding that France and Germany would be the markets most impacted, and EU 11 government bonds the asset most impacted.
It noted that over €2 billion of revenues would be lost to long term investors, with close to €500 billion of Euro government bonds would be removed from the lending/ collateral markets.
Shorter dated transactions would be disproportionately impacted, increasing the risk of settlement fails by possibly as much as 100 percent, and securities lending fee levels would need to increase by over 400 percent just to maintain current revenue streams for long term institutional investors.
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
