Commentary

Friday, February 19, 2021

Bankers: We're Losing Control of the Narrative on Securities Finance

Bank of England Committee Members express concerns over negative press


Author: Ed Blount

Our February 1st blog, "An Existential Moment for Securities Finance," was followed three days later by a meeting of the Securities Finance Committee of the Bank of England. According to the meeting minutes, published yesterday, bankers registered "concerns" about negative headlines for securities lending:

Members talked about the recent moves in Gamestop and the surge in retail trading activity. Concerns were shared about the short-selling headlines emanating from some of press coverage of these moves. Members expressed their disappointment that the benefits of short-selling and lending for price discovery and market liquidity were being drowned out by negative headlines on short-selling.

There was discussion on whether the regulators e.g. FCA should make a public statement on the benefits of short-selling and securities lending to the market. Members unanimously agreed that a lot of time and resource had been deployed in educating regulators and market participants on the benefits of securities lending and short selling.

There was concern that all this work could be undermined by the recent activity and associated press and social media coverage.

Some members were worried that the discussion on securities lending was moving out of the economic arena and into the political one. Members shared their frustration that the securities lending industry was coming under criticism yet there was no medium or mechanism through which the industry could counter those arguments.

It was agreed that discussion on this topic would continue at the next meeting.

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Journal Commentaries

 

Keep Regulation Functional (October 2008)

CSFME’s Executive Director Ed Blount interviews SEC Chairman Chris Cox.
American Banking Association Banking Journal
https://www.questia.com/library/journal/1G1-187494664/keep-functional-regulation-how-financial-regulation

 

The Bear Market Posse, or Counterparty Risk Management during the Recent Turmoil (Sept.  2008)

by Ed Blount
The RMA Journal, v91n1, 28-32, 5 pages Sep 2008.

 

Searching for New Paradigms at BIS (July 2008)

by Ed Blount
Unexpected deficiencies in bank capital after recent market turmoil has regulators rethinking aspects of Basel II and “value at risk.”  
American Banking Association Banking Journal  
https://www.questia.com/library/journal/1G1-181991450/searching-for-new-paradigms-at-bis-market-turmoil

 

Will Basel II Affect The Competitive Landscape? (September 2003)

By Ed Blount
Newly elected Basel Committee Chairman Caruana, Governor of the Bank of Spain, gives his views on the revised Basel capital accord, relative to its potential effects on competition and risk management in banking markets.
American Banking Association Banking Journal
https://www.questia.com/read/1G1-108008773/will-basel-ii-affect-the-competitive-landscape-the​