Global Association of Risk Professionals [GARP]: Capital Rules in EU Could Affect Securities Lending Elsewhere

U.S. market participants, already facing tough requirements, may find some relief, writes John Hintze at Global Association of Risk Professionals, citing research from Credit Benchmark.

“European Union capital rules, to be implemented starting in 2025, are expected to dramatically increase bank capital requirements for securities lending and institutional-investor counterparties’ trading costs. According to a September Credit Benchmark report, that will depress securities financing activity and in turn reduce market liquidity and widen bid-offer spreads, potentially driving up trading costs by €20 billion to €40 billion annually.”

Global Association of Risk Professionals [GARP], November 23, 2022.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.