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4 Securiti es Lending Market Report | June 2023 5

Foreword

>>> Welcome to the 19th editi on of ISLA’s Securiti es Lending Market Report

Recent reports suggest that our markets generated US$7.02 billion in securiti es lending revenues during the fi rst half of
2023, nearing heights not seen since 2008 when reported revenues for the half-year reached US$8.4 billion.

Similarly, fi nancing businesses within prime brokers The most recent proposal from the Fed in North America I have already menti oned 2008 in the
have delivered strong results so far this year. Even as suggests that the largest banks will need signifi cantly context of the profi tability that we are
deal-making, commercial property, and the tech sectors more capital to support the higher levels of reported ‚
have been in the doldrums, the servicing of hedge fund Risk Weighted Assets (RWA) than the revised regime seeing in today s markets, but to some
clients, and parti cularly fi nancing, has been resilient. will require. This raises several important issues as new extent, and while the numbers may
While other businesses within investment fi rms may have capital may not be that readily available. Investors may
some elements of cyclicality, it is clear that the provision be less inclined to subscribe to new equity issuance, and look similar, further comparisons are
of liquidity in the form of short coverage, hedging, and growth from retained earnings can take years to reach the less compelling in my view.
fi nancing remains fundamental to the smooth running of desired levels. In reality, we may see banks simply reducing
our capital markets. or exiti ng those businesses that are high consumers of

I have already menti oned 2008 in the context of the RWAs. While market parti cipants can create new and Andrew Dyson, CEO, ISLA
profi tability that we are seeing in today‘s markets, but to novel soluti ons to reduce some of the extreme outcomes
some extent, and while the numbers may look similar, of this regime, the way that we all think about engaging
further comparisons are less compelling in my view. Today, with prudenti ally regulated enti ti es is about to change.
banks are bett er capitalised and highly regulated, and ISLA follows these developments closely and is already
although something like the LDI crisis did add stress to the working with market parti cipants and wider stakeholders to
markets, specifi c bank failures have thus far been restricted try and ensure that our markets remain open and are able
mainly to parti cular funding and balance sheet profi les. to provide the liquidity that is the lifeblood of the capital
markets that we all cherish.
In terms of regulati on and thinking back to the immediate
aft ermath of the fi nancial crisis, the fi nal elements of In closing, I would also like to thank the team at Northern
the Basel regime that are working their way through the Trust for providing the market commentary for this report.
regulatory pipelines in most major jurisdicti ons can trace Finally, and by no means least, I would like to thank our
their history back to the roots of the fi nancial crisis itself. data partners - tri-party agents BNY Mellon, Euroclear,
While much has already been writt en about the impact Clearstream, and JP Morgan, as well as data fi rms DataLend,
the so-called Basel IV regime will have across our markets, S&P Global, and FIS Global, for providing the underlying
there is no doubt, in my view, that not enough credence
within the rules is given to short-dated liquidity-driven data, without which it would not have been possible to
businesses, including SFTs. compile this report.
AD