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The BNP Paribas guide to securities lending
The BNP Paribas guide to securities lending

The BNP Paribas guide to securities lending


Securities lending generates incremental revenues, but before embarking on a program you need to start by thinking through how to lend, who the right partners are, and what program policies should be in place

We are pleased to welcome you to the BNP Paribas Guide to Securities Lending. We have prepared this guide to help you gain a better understanding of the securities lending business and to develop insights into how firms like BNP Paribas support investors. We aim to equip you with a better understanding of how to engage in this important capital markets tool.

The guide also shows how market participants accrue benefits; how they generate income and liquidity; and how each mitigates the risks involved through collateral or indemnification. You will learn more about how regulators, public and private infrastructure, banks, agents, brokers and other financial institutions have created standards and best practices that promote an efficient and secure marketplace. Lastly, we present how a partnership with BNP Paribas creates the underlying structure for a successful securities lending program.

Partnership is a consistent theme throughout this publication. We emphasize this because securities lending is a business in which all parties must achieve their distinct goals in order for the process to be successful and sustainable. By forging a strong partnership with an agent lender at the beginning of a securities lending program, institutional investors substantially increase the likelihood of a successful program with a robust risk management framework.

An overview of securities lending

Over the years, securities lending has grown in both scale and sophistication. Securities lending was once a simple back-office function to facilitate settlement of other activities, a process that solved some mechanical inconveniences in the ways markets operated. Now, however, it has matured into a front-office function that is an integral consideration for almost every trading and investment management strategy. More recently, securities lending has become a key component for many financial institutions to adhere to stricter regulatory requirements around risk and capital utilization. This has expanded the role of securities lending into compliance, risk, treasury and balance sheet management at major banks.

Securities lending is a USD 2.2 trillion industry with thousands of participating institutions. By facilitating liquidity and collateral movements, it has become a pillar upon which efficient capital markets have been built. Securitieslending has been recognized by governments, regulators and industry participants as an effective strategy to earn incremental income on idle assets while providing market liquidity. When structured properly, many of the risks inherent in today’s market can become neutralized. This guide will provide some of these risk mitigation strategies, while offering insights on the current market environment.

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