December 2023

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European securities finance market participants are getting ready for the next round of regulatory change, with Europe’s Capital Requirements Regulation III finalized and the UK’s Basel 3.1 timetable in place. These versions of Basel III Endgames set the stage for market structure in European securities finance. The next two to five years will create wide-ranging adjustments for all firms.

Finadium has surveyed European securities finance market participants to hear their views on how Basel III Endgames will impact themselves and their counterparties, including agent lenders, banks, hedge funds and beneficial owners. These regulations require immediate attention but are not an existential threat in most cases. Rather, like SFTR, CSDR and other big projects before them, the new rules are already encouraging adoption of new technologies and thinking to make firms more efficient in their operations and balance sheet management.

While securities finance will continue as a business line, implementations of the next Basel III rules starting in 2025 may require some meaningful changes to current practices for firms to maintain profitability while keeping in line with regulatory mandates.

This report should be read by any participant in the European securities finance market, including end-clients, intermediaries, service providers and market infrastructures. It offers a considered view of how upcoming regulatory changes will translate into business and technology management on the desk, segmented by the main types of actors in the market.

Table of Contents

  • Executive Summary
  • Succeeding Alongside Regulation
    • – Methodology
  • Market Understanding and Preparation
    • – Agent Lenders and Beneficial Owners
    • – Borrowers / Prime Brokers
    • – Alternative Investment Managers
  • Six European Solutions to Securities Finance Capital Constraints
  • Industry Collaboration
  • About Finadium LLC

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