Philadelphia, PA (October 5, 2020) –
A new RMA white paper highlights the issues the securities
lending industry must address in the event of a negative interest rate policy
in the U.S.
“Your First
Run-In with Negative Interest Rates?” offers considerations
for negative interest rates in the U.S. and their potential impact on
securities lending when the collateral is cash. The
important paper is the work of RMA’s Council on Securities Lending, which
believes that even
if a negative rate environment is not probable, it is necessary to be prepared
for how such a policy could impact securities lending.
The paper
considers:
- How
negative rates could affect the demand and economics of securities lending.
- The
operational and systemic considerations of negative cash reinvestment yields.
- How
NAV reinvestment funds would be processed.
- Tax
implications.
“Every firm must
consider the implications of negative interest rates in consultation with their
cash management teams and other internal experts,” said Nancy Foster, President
& CEO, The Risk Management Association. “This actionable white paper
details the necessary steps to do so.”
“Negative
interest rates could affect every aspect of securities lending, including
borrower demand, investment valuation, taxation, accounting, operating models,
and more,” said Fran Garritt, Director, Securities Lending, The Risk Management
Association. “This paper is a guide for agent lenders and direct lenders in
assessing the implications of negative interest rates and their impact on
negative cash reinvestment yields.”
To
read “Your First Run-In
with Negative Interest Rates?” click here.
About RMA
Founded in 1914, The Risk
Management Association is a not-for-profit, member-driven professional
association whose sole purpose is to advance the use of sound risk management
principles in the financial services industry. RMA promotes an enterprise
approach to risk management that focuses on credit risk, market risk, and
operational risk. Headquartered in Philadelphia, Pennsylvania, RMA has 1,900
institutional members that include banks of all sizes as well as nonbank
financial institutions. They are represented in the Association by 18,500
individuals located throughout North America, Europe, Australia, and
Asia/Pacific.
Media Contacts
Frank Devlin, fdevlin@rmahq.org,
215-446-4137
Stephen Krasowski, skrasowski@rmahq.org, 215-446-4095