Traditions

Before the invention of computers, financial practices were conducted with reliance upon tangible forms of security and personal insights into the character of those who were pledging collateral. Digitization of securities, currencies and recordkeeping has created new traditions, with new regulations. Examining the evolution of financial market traditions over time helps us understand how we should conduct business in the 21st Century realm of digital innovations like blockchain and distributed ledgers.


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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.

[reprinted from 2005]

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Thursday, June 25, 2020

Governance in the Age of Financial Crises

Use Cases from 2008: General Motors and ING

Author: Ed Blount

In the coming corporate bankruptcy crisis, banks and companies perceived as bad actors in society will find their resolution terms to be very harsh. To avoid being diluted or even wiped out, large shareholders and corporate boards of directors must be constantly vigilant in exercising their oversight duties. Stakeholders must enforce policies which require company management to act in a socially responsible fashion.

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Tuesday, March 5, 2019

Securities Processing: Big Tasks Lie Ahead

by Ed Blount (Reprinted from the Banking Journal of the American Bankers Association, May 1981)

Author: Ed Blount

The nature of the securities business has changed dramatically in the last decade. A full understanding of those changes is necessary in order to appreciate the challenges facing the industry in the Eighties. Impressive strides have been made since the days of the back-office disaster scenes in the late Sixties and early Seventies that forced over 100 brokerage firms to go "belly up." Virtually all major brokers have automated their order entry process. Many have also developed the ability to interface these front-end systems with clearing banks, other brokers, and with industry facilities such as the Trade Comparison Service, Continuous Net Settlement System, and Institutional Delivery System each of which was introduced in the last decade.

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