SFTR is taking up substantial bandwidth now, but the future of the agency lending business will be defined more by larger financial services industry trends than the shorter-term need for regulatory reporting. Clean data will surely go far to enhance efficiencies, improve internal analytics and optimize balance sheet management for both securities finance and across the firm. But the natural evolution of technology, structural demand for securities loans and the interests of clients are of much greater importance.
This Finadium report considers external financial services industry trends that are affecting the agency securities lending business. From no-fee fund products to Single Counterparty Credit Limits to bank-wide reorganizations, agents will need to develop robust strategies to respond and get ahead of the pack.
The business of agency securities lending has spent the last decade retooling itself for new regulations, technology and regulatory reporting. Agents have largely succeeded in weathering these storms and generating profitable outcomes. Now however, challenges are coming into view that suggest a further realignment of agent lenders and their clients. If Basel III was Act I, the changes ahead will be Act II then a well-deserved intermission.
This report has been written for agency lending professionals to consider external financial services industry trends that are affecting the business. Professionals know well the projects in front of them; this report paints a broader picture of change in capital markets and the role of agency lending in that evolution. Beneficial owners, service providers and regulators may also benefit from a greater understanding of agent lender business models and challenges.
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