IMN Beneficial Owners Conference: Collateral Control on the Rise

At the 21st Annual Beneficial Owners’ International Securities Lending & Collateral Management Conference in San Francisco, attendees said they’re most interested in learning about “everything,” though non-cash collateral management was the most common response in terms of choosing a particular topic.

Specifically, 50% are most interested in learning about everything, 25% are most interested in non-cash collateral management, 12.5% want to learn most about cash management, and 12.5% are interested in learning about regulation, perhaps an indicator that the bulk of the focus on regulation is fading.

Regarding collateral management, Mike Saunders, head of Trading & Investments, Securities Lending, at BNP Paribas Securities Services, offered his advice that beneficial owners should ensure they have the proper risk guidelines in place to be able to effectively monitor the collateral they receive to ensure it’s consistent with their guidelines. And these guidelines are necessary, he said, to also ensure that in the event of an insolvency, the beneficial owner, or the agent acting on their behalf, has the ability to liquidate that collateral.

Tim Smollen, global head of agency securities lending at Deutsche Bank, noted that beneficial owners have more control and transparency with collateral than they did in the past, as there has been a move to more customized guidelines such as percentage limitations by country, sector or issuer.

When asked what improvements would provide the most benefit to their program, 60% of beneficial owners said they wanted improved benchmarking, and 27% want additional transparency.

Craig Starble, chief executive officer at eSecLending, said clients have become more engaged with their programs, becoming more interested in the details of how they extract the most value. “The only way to do that is to have a high degree of communication with your agent lender, and we’re seeing that now,” he said.

And while only 19% of beneficial owners said they don’t have enough insight into their securities lending program, there could still be room for improvement with regards to communication, as 43% said they thought they’re ok, but maybe there is more they should know.

As a whole, there could be more light shed on the industry, as Bill Kelly, head of global client relationship management & business development at BNY Mellon think that by the end of 2015 the Financial Stability Board is likely to figure out what information will be required from the industry so that the marketplace can see what’s going on in terms of the size of the activity, what’s going on with collateral, etc.