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Securities Lending Market Report | H1 2024

>>> Collateral

Fig 9 - S&P Global Fig 10 - S&P Global

Global Equity Market Cash vs Non-Cash 800.00 410.00 North American Equity Market Cash vs Non-Cash 330.00

On-Loan vs Cash (Billions €) 600.00 700.00 On-Loan vs Non-Cash (Billions €) On-Loan vs Cash (Billions €) 420.00 310.00 On-Loan vs Non-Cash (Billions €)
320.00
580.00
400.00
560.00
600.00
390.00
300.00
540.00
290.00
380.00
500.00
520.00
370.00
280.00
400.00
270.00
360.00
500.00
300.00
260.00
350.00
480.00
340.00
250.00
200.00
460.00
440.00
320.00
230.00
230.00
310.00
420.00
0.00
Jan 24
Jan 24 Feb 24 Mar 24 Apr 24 May 24 Jun 24 100.00 330.00 Feb 24 Mar 24 Apr 24 May 24 Jun 24 240.00
Group Balance vs Cash Group Balance vs Non Cash Group Balance vs Cash Group Balance vs Non Cash
In North America the picture around collateral is quite different • North American market predominantly utilising cash collateral
from other models globally. The US market has traditionally although use of non-cash is expanding.
How we think about collateral and its role as the driver that To summarise, in H1 2024, Collateral Markets were revolved around cash collateral with an active market around
underpins securities lending has evolved in line with the marked by: the reinvestment of cash collateral to generate incremental • Current regulatory ceiling on use of non-cash collateral,
demands that we now place upon it. Traditionally, collateral • Non-cash collateral levels broadly stable through the income for lending clients. especially around ERISA funds.
was simply seen as a buffer or mitigant against loss if the period.
borrower was unable to return equivalent securities at the Fig 11 - S&P Global
end of the trade. Today collateral often defines trades as • Both cash and non-cash collateral saw some seasonality
lenders look to drive specific collateral outcomes to meet during the period. European Equity Market Cash vs Non-Cash
their obligations around regulatory regimes such as uncleared • Half-year end balance sheet management appears to have
margin rules for derivatives, or borrowers look to push high played out almost exclusively through cash collateral trades. 60.00 180.00
RWA assets off their balance sheet.
• It is likely that non-cash trades could underpin regulatory 50.00 150.00
Globally, the relationship between cash collateral and non- compliance structures and will be the last to be taken off as
cash cash collateral is broadly evenly split, but there is more balance sheets contract into the half year. 40.00 120.00
volatility in the cash collateral numbers. The reasons for this On-Loan vs Cash (Billions €) 30.00 90.00 On-Loan vs Non-Cash (Billions €)
may be varied, but cash is likely used to facilitate incremental
trades, and borrowers may, at times, run out of eligible non- 20.00 60.00
cash collateral. Also, regulatory nuances and historic market 10.00 30.00
conventions also drive different outcomes in various markets. 0.00 0.00
Jan 24 Feb 24 Mar 24 Apr 24 May 24 Jun 24

Group Balance vs Cash Group Balance vs Non Cash
The market in Europe has, for historical reasons, been one that • Europe is very much dominated by non-cash collateral with
has been built around the use of non-cash collateral although over 80% of all collateral in the form of non-cash collateral.
we do see some cash collateral being used by some lenders. The • In line with other markets cash collateral appears to be more
availability of short-term investment opportunities in Europe has volatile.
been a drag on the use of cash collateral.