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For the six month period to 30 June 2019, the following   be down to several one-off factors, including banks
        are the key highlights from our review of the global   looking to capitalise on the USD liquidity premium seen
        securities lending markets.                   at the half year which led to an increase in the demand
                                                      for US Treasuries.
           ‹ As at 30 June 2019, reported global on-loan balances
          were circa €2.2 trillion. This was broadly unchanged     ‹ In Europe, there has been less demand to borrow
          from the reported number six months earlier.   HQLA following the end of the ECB’s QE program in
                                                      December 2018. As demand has fallen, fees have been
           ‹ Reported securities being made available by   compressed which has in part been compounded by
          institutional investors within lending programs   additional HQLA assets coming into programmes.
          showed a notable increase, rising from €16.6 trillion
          at 31 December to €19.6 trillion at the half year end.     ‹ In equity securities lending markets, balances
          However, it should be noted that during this period,   remained stagnant as hedge funds and other
          the  Dow  Jones  Industrial  Index  increased  by  some   Alternative Investment Managers (AIMs) appeared to
          15% over the same period. With  over 67% of all   lack investment conviction, with the uncertainties of
          securities  being  made  available  for lending  being   the global trade war between China and the US, Brexit
          classified as equities, the reported increase in overall   and wider central bank policies all creating a climate
          lendable appeared to be driven in part by increasing   of uncertainty.
          asset valuations rather than assets coming into
          lending programmes.                          ‹ Recently  published  statistics  suggest  that  revenues
                                                      from securities lending fell 15% in the first six months
           ‹ Government bonds being made available for lending   of the year compared with the same period in 2018.
          did appear to show new supply coming into the market,
          increasing by 13% to €2.8 trillion. As insurers take     ‹ The provision of securities lending liquidity from
          advantage of all-time record low yields, these securities   Sovereign Wealth Funds (SWFs) continues to be a
          are  finding  their  way  into  lending  programmes  as   prominent feature of our markets. As at 30 June, SWFs
          holders look to maximise returns.           made up 6% of available inventory and 14% of loans
                                                      globally across all asset classes.
           ‹ Government bond lending represented circa 43% of all
          securities on-loan globally, highlighting its continued     ‹ Reported non-cash collateral was circa €1.5 trillion,
          importance to overall secondary market liquidity and   and represented 67% of all lending business globally.
          the role of securities lending in the context of HQLA
                                                       ‹  In Europe, the reported amount of non-cash collateral
           ‹ The expected additional demand for high quality   held in tri-party was €1.4 trillion. Within this number,
          collateral as a result of the implementation of   equity collateral increased marginally from 41% to 43%
          waves four and five of the uncleared margin rules in   of the reported total.
          2020,  will  drive  additional  requirements to borrow
          government bonds.                            ‹ 37% of government bonds held as collateral within tri-
                                                      party were classified as Asian securities.
           ‹ In the run up to the half year end, we saw the expected
          reduction in on-loan balances as banks repositioned     ‹ Following the publication of the detailed RTS
          trading books to comply with binding regulatory   for SFTR in April, the immediate timeline for the
          constraints. Just prior to the half year end however,   implementation of this important initiative has
          there was a sudden spike in the demand to borrow   been  defined.  The  industry  will  have  to  mobilise
          government bonds with on-loan balances increasing by   considerable resources to achieve compliance with the
 Executive Summary  7% in the final days of June. Reasons for this sudden   reporting obligations of Article 4 ahead of go-live in
                                                      April 2020.
          increase in the demand for government bonds may
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