The Bank of England (BoE) released the minutes from the March 2025 meeting of the Securities Lending Committee.
Items for discussion included embedded practices related to Diversity, Equity and Inclusion, the CREST development program, data integrity in securities finance markets, the 2025 outlook for securities lending, recalls with T+1, and an update from the Tax & Regulatory sub-committee.
In the 2025 outlook, the minutes showed that members noted a busy start to the year and the impact of geopolitical changes on securities lending activity, including decreasing spreads in treasury markets. High quality liquid assets saw stronger demand compared to the previous year, indicating robust funding activity. Firms continue to seek capital-efficient structures to optimize operations and drive profitability.
The broker market remains active in total return swaps highlighting continued demand for these financial instruments. Demands for more automation and greater functionality are widespread across the market, as participants seek greater efficiency in existing markets and increase activity in developing markets. An increase in activity from neo-brokers was noted and if their activity follows best practice in relation to securities financing services offered.
Representatives from the International Securities Lending Association (ISLA) provided an overview of securities lending recalls in light of UK T+1 accelerated settlement regime, highlighting changes to recommended best practices, a greater adoption of automation which resulted in an increase in recall rates. This necessitates further adjustments to ensure efficient management of the recall process. Further discussion centered on future changes to UK CSDR legislation to reduce ambiguity on transactions which are within scope and to provide clarity on exemptions for future dated securities financing trades.