Friday, June 11, 2021

Apple Sauce or Orange Juice?

The Inadequacy of Existing Databases in Securities Finance

Author: Ed Blount

Databases designed for specific purposes often fail when asked to solve a different problem. As an example, the securities finance databases of leading data providers such as FIS Astec, Datalend, and IHS Markit, designed more than 20 years ago for performance benchmarking, are inadequate when queried for the purpose of the loans themselves. Even regulatory databases enriched with new SFTR filings to help authorities monitor leverage, are unable to determine the propriety of the loans.

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Categories: All, Commentary, Cross-Post

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Monday, June 7, 2021

RESTORING TRUST IN MARKETS: RMA Podcast Series

Creating ESG Models to Change Negative Views of Financial Markets

Author: Ed Blount

Good morning, this is Ed Blount and I am speaking to you from the Center for the Study of Financial Market Evolution here in Washington, D.C. I've been asked by my good friends at the Risk Management Association, RMA, just up the road in Philadelphia, to offer some thoughts on "how data-based models can be used to change the negative views of financial markets that are held by some bank customers and regulators, especially in the wake of the pandemic."  So, that is an interesting question.

I'm going to approach the answer in two parts:

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Wednesday, June 2, 2021

Moving ESG Beyond Policy into Practice

Bankers Seek Common Ground with Politicians

Author: David Schwartz

Accountability in voting is in the news, and nowhere more so than on Wall Street. Through their U.S. credit policy association and its Asian counterpart, Bankers have responded to suspicion among critics that problems abound in the murkiness of the proxy voting practices of asset managers for large pensions, mutual funds, and other institutional investors. With the launch of the "Global Framework for ESG and Securities Lending (GFESL)," the partnership by the two industry associations aims to provide a shared decision-making framework for managing ESG considerations in securities lending. But does it go far enough?

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Wednesday, June 2, 2021

Managing Cash for Changing Flows and Structures

Securities Finance Strategies: 1988 - 2005

Author: Ed Blount

Since 1980, the cash-based securities lending program has evolved to become the prevalent form of collateral management model in the United States. By 2005, U.S.-domiciled insurers, pension funds, mutual funds and corporate treasurers had securities valued at more than $1.25 trillion on loan. This evolution has not come without difficulties. In the 1990s, securities lenders found that a rising interest rate environment suddenly depressed the value of their cash collateral investments, in some cases to the point of loss when lenders were unexpectedly required to return cash deposits to borrowers.  A few lenders sustained losses that exceeded the income they had earned over the course of several years, although in several cases agent lenders absorbed the damages in order to protect their franchises.
2005]

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Categories: All, Traditions

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Saturday, May 22, 2021

Get Your ESG House in Order

Here Come the Regulators.

Author: David Schwartz

Environmental, social, and governance (ESG) investing has taken global financial markets by storm over the last few years. Post-pandemic, the demand for ESG investments has only intensified and has proven to be much more durable than a fad. However, lack of consistency and transparency threatens the trustworthiness of ESG as a category, and has led to accusations of 'greenwashing.'  As a result, US regulators and their counterparts in the EU and UK have begun building regulatory and enforcement momentum, focusing on the quality and accuracy of ESG disclosures by asset managers and investment funds. Accounting and other standard setters have joined their regulatory brethren in calling for consistency in financial and non-financial ESG reporting.

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