1 / 10

Securities Borrowing & Lending

Securities Borrowing & Lending. 05 June 2008. What is Securities Borrowing & Lending?. Securities Borrowing & Lending (SBL) can be defined as an outright transfer of securities from the Lender to the Borrower. Borrower provides collateral for the duration of the SBL loan.

heba
Download Presentation

Securities Borrowing & Lending

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Securities Borrowing & Lending 05 June 2008

  2. What is Securities Borrowing & Lending? • Securities Borrowing & Lending (SBL) can be defined as an outright transfer of securities from the Lender to the Borrower. • Borrower provides collateral for the duration of the SBL loan. • At the end of the loan, there is a transfer of equivalent securities and equivalent collateral. • Delivery of Collateral • BorrowerBroker • Delivery of Securities • Delivery of Securities Fee • Income • Lender

  3. Operational Work Flows Loan Initiation Delivery of Collateral Delivery of Securities Payment of Lending Fees Management of Collateral & Entitlements Return Securities Initiate Return/ Recall of Securities

  4. Benefits of Lending • Earn income, enhances the investment performance of the securities portfolio • Offset services’ costs like custody fees • Provides liquidity to markets

  5. Benefits of Borrowing • Facilitates failed settlement • Covers short positions • Supports derivatives activities • Short selling • Provides liquidity • Provides floor price

  6. Considerations for Borrower • Strategy • Duration of loan – extended borrowing can erode returns • Loan costs • Corporate actions • Availability/ Liquidity

  7. Considerations for Lender • Borrower default • Quality of collateral • Day-light exposure • Settlement Delays • Market Inefficiencies • Loss of legal ownership • Loss of voting rights

  8. Operational Considerations • Methods of delivery and loan recall • Revaluation (mark-to-market) – margin call • Dealing with Corporate actions • Linkage to other operational functions • Reporting and ledger balances • Credit Risk - counterparty

  9. Terms of Agreement • What would the lender of securities want to include in the Agreement? • Term • Rate basis • Right to recall • Collateral – Haircut/ Discount/ Substitution of Collateral • Corporate Actions • Events of defaults

  10. Terms of Agreement • What would the borrower of securities want to include in the Agreement? • Term • Rate basis/ Fee Structure • Right to recall • Collateral • Computation of Margin call • Guarantee of Loan • Minimum loan period

More Related