Securities finance becoming 'more complex' due to regulation - panel

Securities finance becoming 'more complex' due to regulation - panel

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The securities finance industry is becoming increasingly complex as clients try to tailor their lending programmes to their specific requirements against the backdrop of changing regulation, a panel of experts has said.

Speaking at the IMN European Beneficial Owners’ Securities Finance and Collateral Management conference in London on Tuesday morning, a panel of experts said securities financing is becoming more complex as firms navigate the increasingly sophisticated demand of clients and changing regulatory requirements.

Mark Faulkner, co-founder of Credit Benchmark, said: “What we mean by optimisation is… doing the best for oneself, one’s business and or one’s clients, and what does that mean, doing the best from a regulatory perspective, an economic perspective, an efficiencies perspective.”

Faulkner added: “All these kinds of things come into play. And then you realise different regulations apply around the world and different counterparts and then you realise that doing the best for oneself and one’s clients starts to fragment and then the complexity begins and I suppose one of the challenges the industry has is dealing with that complexity.”

Brooke Gillman, managing director and head of Client Relationship Management at Eseclending, told the conference different clients have different requirements: “You see that again and again, the commentary where optimisation is different depending upon who you are and what it is you know your DNA, your structure and what your organisation looks like is a very obvious point.”

She continued: “Securities finance and securities lending is being viewed in a much more holistic way for many and everyone again is different and for many that’s still a solid theme. Five, 10, 15 years ago securities lending was a straight-forward product used to add incremental returns but now securities lending is being used differently which may lead to different tolerance.”

Trevor Amoils, securities finance and collateral at AustralianSuper, the Australian fund, adopted a more cautionary tone: “What I am seeing now is a move from away collateral on stock loans and worse collateral with some sort of credit exposure. And that is a dangerous place to be.”

A report published last week by S&P Global Market Intelligence found that strong governance and oversight are “essential” to ensure an asset owner is fulfilling its fiduciary responsibilities in a market increasingly dominated by regulation.

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