Securities lending continues to expand in Asia, though the market has certainly reflected concerns about counterparty risks and other developments that have been exhibited around the world. Lending activity did slow relatively but we are confident it will eventually return to its former self. Encouragingly, clients have restarted lending and others have looked to implement new lending programmes or expand existing ones because they continue to see the value and the importance of securities lending and borrowing. Also, new prospects have been looking at a possible lending programme. 

 

 

Lenders are more cautious with borrowers that we have dealt with. Some customers have become a little more attentive to all aspects of their portfolio and require more regular reporting and exposure tracking. State Street always conducts a vigorous review and monitoring of counterparty exposure. We provide customers with industry-leading tools to help them monitor and manage their lending programmes and we are committed to the highest levels of transparency.

 

 

There is an increasing emphasis on counterparty risk, market volatility, and securities risk on the reinvestment front. Nonethe-less, the situation still looks promising since we are seeing a greater inflow of securities lending at this point.

 

 

We continue to explain securities lending programmes to our customers. We work closely with them to refine the guidelines; to review their lending programmes that are currently running; to keep pace with some changes of counterparty players in different markets they are dealing with; etc. 

 

State Street has a sizeable programme, a conservative approach and solid fundamentals in running securities lending programmes that have helped customers weather recent market issues.

 

 

All markets are continuing to lend. In fact, countries such as China and Malaysia have introduced a domestic lending market, which can certainly be considered as a positive sign for future expansion in the Asia-Pacific region.

 

 

Regulators have taken steps to protect local markets and this is understandable given the financial conditions. That said, these changes have focussed not on lending, but rather on other practices. We continue to work with regulators and take part in the regional discussions that take place, and are supportive of these efforts. Encouragingly, we see that more markets have recognized the importance of securities lending and borrowing.

 

 

What is paramount for agent lenders is assisting their clients in mitigating both counterparty and collateral investment risk, as well as focussing on the highest levels of transparency in risk management. State Street has stringent controls on the different risks in its securities lending programme. 

 

Our size and focus on transparency put us in good stead to work with our customers on these fronts. In addition, State Street has worked extensively with the various regulators and industry bodies, because ultimately, all constituents need to be comfortable with the securities lending programmes.