Osla Lending Agreement

December 14, 2020 | Category: Uncategorized

There is also a second type of agreement that is generally used in the market between custodians and their portfolio clients. This agreement authorizes the custodian to lend a portfolio to the client and may also outline counterparty and security policies. OSLA remains widely used in the world of equity lending agencies and some agency agreements consider the underlying executive contract to be an OSLA; These changes can also be made. As markets have achieved significantly lower returns in recent years, pension funds have been under pressure to maintain their performance in order to meet their future pension commitments. In light of this subject, the word that passes the most lips and hands is the “cover report.” According to the Financieel Toet-singskader (FTK), which will be in effect until January 2006, pension funds must adhere to strict coverage rates in order to avoid future underfunding. The debate has led the sector to seek more widely alternative routes in order to meet the required solvency requirements. Securities lending can be an attractive tool for pension funds to add value to the portfolio without increasing risk. What is securities lending? Securities lending is the activity in which a lender (part) of its shares or bonds in its investment portfolio lends to a party that has a temporary need for these securities. Although legal ownership (voting rights) is transferred from the lender to the borrower, the lender remains the economic beneficiary of the securities (market risk, dividends), obtains guarantees and receives a discount (fee) for this transaction.

During the loan process, legal rights such as dividends, rights, issue bonuses and voluntary corporate shares are transferred to the borrower. The lender is compensated by the borrower for the loss of additional income during the term of the loan, for example. B by paying a compensatory tax for the dividend. The lender still has the right to recall borrowed securities and, therefore, borrowing securities does not prevent asset managers from actively managing their portfolios. The activity is governed by another series of contracts exchanged and signed between the borrower and the lender.

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