The International Securities Lending Association (ISLA) released the 19th edition of its securities lending markets report. In a forward, Andrew Dyson (ISLA’s CEO), noted that recent reports suggest that our markets generated US$7.02 billion in securities lending revenues during the first half of 2023, nearing heights not seen since 2008 when reported revenues for the half-year reached US$8.4 billion.
“The most recent proposal from the Fed in North America suggests that the largest banks will need significantly more capital to support the higher levels of reported Risk Weighted Assets (RWA) than the revised regime will require. This raises several important issues as new capital may not be that readily available. Investors may be less inclined to subscribe to new equity issuance, and growth from retained earnings can take years to reach the desired levels. In reality, we may see banks simply reducing or exiting those businesses that are high consumers of RWAs,” he writes.
Northern Trust provided their perspectives and experiences of the equity and fixed income markets more broadly over the past six months: “As we look ahead to the second half of 2023 and beyond given the ever-changing macro-economic landscape it seems increasingly difficult to attempt to predict the trajectory of the global markets. However, one remaining constant is the on-going need to remain on top of the ever-evolving regulatory landscape.”
“The ability to optimise the use of portfolio assets across competing needs such as collateral management, liquidity requirements, and the drive for enhanced returns will be critical for beneficial owners seeking to navigate this complex global market environment.”
The report also includes market highlights and what’s happening with SFTR data.
“In many corners of our industry Securities Financing Transaction Regulation (SFTR) is thought of in the same breath as other business-as-usual processes. However, after attending probably hundreds of meetings on this regulation, like many others, it might be more appropriate to think of it as a semi-dormant volcano. That analogy [was] chosen because it alludes to the vast size of the topic, its ability to influence tectonic sized developments and, like those sleeping mountains, could erupt with little notice.”