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Executive Summary

For the six-month period to 31 December 2019, the following are the key
highlights from our review of the global securities lending markets.

• As at 31 December 2019, reported global on-loan • Government bond lending represented circa 46% • The lending of US Treasuries fell away in the final • In Europe, we saw non-cash collateral held in triparty
balances were circa €2.3 trillion. Although up of all securities on-loan globally, highlighting its quarter, as new issuance and the role of the Federal increase to circa €1.6 trillion. Within this number,
marginally, this was broadly unchanged from the continued importance to overall secondary mar- Reserve (Fed) to pump liquidity into the system equity collateral increased marginally from 43% to
reported number six months earlier. ket liquidity and the role of securities lending in dampened down the demand to borrow HQLA. 45% of the reported total.
the context of High Quality Liquid Assets (HQLA)
• Reported securities made available by institutional mobilisation. • Strong equity markets did not come through in • 35% of government bonds held as collateral within
lenders within lending programmes showed a nota- either hedge fund or other alternative investment tri-party were classified as Asian securities.
ble increase, rising from €19.6 trillion as at 30 June, to • With only 33% of available government bonds management activity.
€21 trillion at the year end. It should be noted how- on-loan, the expected additional demand for high • Following the publication of the detailed level three
ever, that the Dow Jones Industrial Average (DJIA) quality collateral as a result of the implementation • Recently published statistics suggest that revenues RTS for SFTR in January, the immediate timeline
index rose by circa 22% in 2019. With over 65% of all of waves five and six of the Uncleared Margin Rules from securities lending have fallen some 6% compared for the implementation of this important initiative
securities classified as equities, the reported increase (UMR) in 2020, will drive additional requirements to to 2018. 2019 was however the second most profit- has been defined. The industry is mobilising con-
in overall lendable appeared to be driven largely by borrow this asset class. able year for the industry since 2008, with reported siderable resources to achieve compliance with the
increasing asset valuations rather than additional earnings estimated to be around $8-10.5 billion². reporting obligations of Article 4 ahead of go live
assets coming into lending programmes. • In the run up to the year end, we saw the expected in April 2020.
reduction in on-loan balances as banks repositioned • The provision of securities lending liquidity from
• Government bond lending saw spill over from liquid- trading books to comply with binding regulatory Sovereign Wealth Funds (SWFs) continues to
ity issues in the repo markets in the second half of constraints. We also saw banks building positions be a prominent feature of our markets. As at 31
the year, with price volatility spiking rebate rates in of European government bonds however, as Brexit December, SWFs made up 6% of available inventory
mid-September. uncertainties began to dissipate. and 15% of loans globally across all asset classes.

6 ²Please note that we have seen some divergence in absolute performance readings across industry data providers, 7
which may be due to the idiosyncrasies in their underlying data sets and methodologies.