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SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com Securities Borrowing & Lending 05 June.

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Presentation on theme: "SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com Securities Borrowing & Lending 05 June."— Presentation transcript:

1 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com Securities Borrowing & Lending 05 June 2008

2 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 2 What is Securities Borrowing & Lending? Securities Borrowing & Lending (SBL) can be defined as an outright transfer of securities from the Lender to the Borrower. Borrower provides collateral for the duration of the SBL loan. At the end of the loan, there is a transfer of equivalent securities and equivalent collateral. Delivery of Collateral Borrower Broker Delivery of Securities Delivery of Securities Fee Income Lender

3 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 3 Operational Work Flows Loan Initiation Delivery of Collateral Delivery of Securities Management of Collateral & Entitlements Initiate Return/ Recall of Securities Payment of Lending Fees Return Securities

4 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 4 Benefits of Lending Earn income, enhances the investment performance of the securities portfolio Offset services’ costs like custody fees Provides liquidity to markets

5 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 5 Benefits of Borrowing Facilitates failed settlement Covers short positions Supports derivatives activities Short selling Provides liquidity Provides floor price

6 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 6 Considerations for Borrower Strategy Duration of loan – extended borrowing can erode returns Loan costs Corporate actions Availability/ Liquidity

7 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 7 Considerations for Lender Borrower default Quality of collateral Day-light exposure Settlement Delays Market Inefficiencies Loss of legal ownership Loss of voting rights

8 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 8 Operational Considerations Methods of delivery and loan recall Revaluation (mark-to-market) – margin call Dealing with Corporate actions Linkage to other operational functions Reporting and ledger balances Credit Risk - counterparty

9 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 9 Terms of Agreement What would the lender of securities want to include in the Agreement? ► Term ► Rate basis ► Right to recall ► Collateral – Haircut/ Discount/ Substitution of Collateral ► Corporate Actions ► Events of defaults

10 SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | www.kimeng.com 10 Terms of Agreement What would the borrower of securities want to include in the Agreement? ► Term ► Rate basis/ Fee Structure ► Right to recall ► Collateral ► Computation of Margin call ► Guarantee of Loan ► Minimum loan period

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