Agent lenders are becoming more like equity agency brokerages, according to a securities lending study by BNY Mellon Asset Servicing. The research, Resetting the Roadmap: Managing in a New Securities Lending Environment for Beneficial Asset Holders, discovered that brokers can no longer commit large portions of their balance sheet to general collateral borrowing.
The study also confirmed that regulators are moving forward to place securities lending in a more clearly defined category within financial markets. Although regulators can see both the pros and cons for securities lending, they feel that it remains a market in need of both transparency and regulation.
Cash-collateral took a hit during 2008, and as a result many have softened their opinion on taking non-cash collateral. However the study showed that only 31% of funds surveyed changed their securities lending behaviour as a result of collateral losses.
The study was produced in conjunction with independent research and consulting firm Finadium, including interviews with 34 leading public, private and non-profit funds managing nearly $747 billion in assets.
Josh Galper, Managing Principal of Finadium, noted: “Agent lenders are pivotal business partners for beneficial asset holders in securities lending. Going forward, they will successfully meet their clients’ needs by focusing on risk management and capitalizing on changes in market structure.”
Kathy Rulong, Global Head of Securities Lending at BNY Mellon Asset Servicing, said: “As a leading agent lender with a long-standing commitment to innovation in this field, we are ideally positioned to help shape the future of the securities lending industry. By balancing performance and risk, delivering superior service and investing in people and technology, we can ensure that our clients maximize the opportunities available to them.”
The new study can be found here
Giles TurnerNews Editor