Embracing change in securities finance: 6 key insights from ISLA’s Annual Conference

Left to right: Tara Costello (Sales Specialist, Taskize); Anna Mulholland (Head of Customer Engagement, Osttra); Kofi Karikari (Director and Country Lead, Osttra); Simon Gibbs (Head of Partnerships, Taskize); Neil Taylor (Head of Repo Business Development, Osttra) 

Taskize recently attended ISLA’s 31st Annual Securities Finance & Collateral Management Conference – a great opportunity for us to engage with industry leaders, explore emerging trends, and highlight how the Taskize platform can add value to the securities lending sector.  

Here are our six key takeaways from the sessions we attended.

1. Navigating the new geopolitical landscape in 2024

In a session titled “Shifting sands: Navigating the new geopolitical landscape in 2024,” Stephen Fisher, Global Head of Government & Public Affairs at Deutsche Bank, delved into the complexities of the current geopolitical climate. With the highest number of global conflicts since the Cold War and upcoming elections in Europe likely to spur political polarisation, the session underscored the significant transformations for the financial market anticipated in 2024. 

Taskize takeaway: Europe’s economic growth is expected to return to trend levels, though inflation will remain volatile. Wage growth will be slow, and labour shortages will persist, with potential changes hinging on the outcomes of elections in France and the UK.

2. ISLA’s strategic priorities for 2024 and beyond

Andrew Dyson, Chief Executive Officer of ISLA, outlined the strategic priorities for ISLA moving forward. The focus will be on ‘mutualising’ common problems and acting as an industry body to represent and advocate for the securities finance sector. 

Taskize takeaway: ISLA aims to strengthen its role as a unifying body in the industry, addressing shared challenges and fostering collaboration. 

Left to right: Andy Dyson (CEO, ISLA); Sejal Amin (Head of Events, Marketing & Comms, ISLA); Simon Gibbs, (Head of Partnerships, Taskize)

3. Regulatory, tax, and legal highlights

This session provided an overview of impending regulations and ISLA’s advocacy plans. Key legal initiatives were discussed, including updates to the General Master Securities Lending Agreement (GMSLA) and collaborations with the Pan Asian Securities Lending Association (PASLA). 

Taskize takeaway: There is a clear demand for standard legal documentation. The Basel Endgame has been postponed to 2025, and both T+1 and CSDR will lead to penalties being incurred. Security interest collateral arrangements such as pledge and pledge back are increasingly accepted as a risk-free mitigation strategy against defaults.

4. ‘Basel Endgame’: Regulatory challenges ahead

The session on the ‘Basel Endgame’ provided insights into the timeline and implications of the Basel framework. Speakers discussed the readiness of the market and the tools available to manage risk-weighted assets (RWA). 

Taskize takeaway: The Basel III global regulatory framework will significantly impact the financial sector, requiring banks to increase their capital by 25%. Europe plans to implement these changes by January 2025, with the UK following in July. The focus is on enhancing resilience in financial services, particularly in capital markets, liquidity, and collateral risk management.

5. Leaders’ perspectives and predictions

Industry leaders shared their insights on the evolving market landscape and the challenges ahead, such as resource management, increased costs, and the need for technological innovation. 

Taskize takeaway: The securities finance industry faces rising costs and resource constraints. There is a need for greater automation and interoperability among fintech providers to streamline processes and reduce costs. Collaboration within the industry is crucial for aligning standards and improving efficiency.

6. Product innovation and ‘the scarcity debate’

This session explored the strategic divergence in the market driven by capital optimisation, rising trading costs, and digital innovation. The discussion highlighted various financing solutions, including central clearing, security interest collateral arrangements, and the increased use of derivatives. 

Taskize takeaway: The next five years will see significant changes in securities finance due to rising transaction costs. Innovations such as Total Return Swaps (TRS) and smart bucketing will play a key role. In 2009, the return target was around 25% but today it’s closer to 10% – profitability in banking has halved due to these increased operating costs. There is a need for diversification and the inclusion of more beneficial owners to create a level playing field. 

In summary, attending the ISLA conference provided Taskize with invaluable insights and opportunities to demonstrate the evolution of our platform to clients and partner colleagues. By fostering collaboration, embracing technological innovation, and staying ahead of regulatory changes, we continue to drive efficiency and resilience in the securities finance sector.