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2019 delivers second highest annual revenue in the last
decade
In North America, equity specials shine in 2nd half of
year
Fee compression weakens global fixed income revenues
It is neither the best nor the worst of times for securities
lending, which means there is the opportunity for movement in
either direction as we look ahead to 2020. Before we turn the page,
however, we review the year that was 2019. At the end of 2018,
things looked rather bleak for capital markets and securities
lending revenues were soft given the decline in asset values which
reduced loan balances. That makes Q4 2018 a relatively easy YoY
comp, which Q4 2019 improved on by 3.8% with $2.4bn in revenues.
That put the total for 2019 at $10.1bn, a decline of 6.3% relative
to 2018. While the yearly revenue comparison is less favourable,
the underperformance was primarily concentrated in the first half
of the year.
Read further in the full version
of review (link below)
HQLA classifications for securities finance
Leveraging a new dataset for lendable asset evaluation
Classifying global fixed income securities by HQLA status
Utilization broken out by collateral eligibility
New characteristics for securities lending performance
attribution
A key aspect of the BIS Basel III regulation is the Liquidity
Coverage Ratio (LCR) which requires banks to hold enough
High-Quality Liquid Assets (HQLA) to "survive a period of
significant liquidity stress" lasting 30 calendar days. To maintain
compliance banks must test assets for HQLA status and maintain 100%
of their estimated 30 net cash outflow arising from a stress
scenario. As a result, the classification of securities between the
three categories of HQLA has taken on great significance for the
banking industry.
To support independent review, the Portfolio Valuations &
Reference Team (PVR) team at IHS Markit has created a model to
classify fixed income securities based on a variety of fundamental
and market-based characteristics. While the model inputs are
proprietary and only available to PVR clients, Securities Finance
clients have been granted complimentary access to the output
classifications.
Read further in the full version
of review (link below)
