Stock lending
A securities (shares and stock lending or infrequently stock lending ) is in banking , a business in which the lender a borrower a securities for a limited time to use leaves, which he usually receives a fee.
In a broader sense one summarizes under the term lending ( English Securities Lending also the related business areas) repurchase agreement ( english repurchase agreement , repo ) and sell-buy-back.
term
In the legal sense, contrary to the name, a securities loan is not a loan , but a loan in kind in securities. In contrast to a normal lending transaction, the borrower becomes the owner of the securities and does not have to return the originally borrowed papers, but only those of the same type and quality. However, the term stock lending has become common and, economically, the transactions are usually equivalent to lending transactions.
It is usually agreed that the borrower will reimburse the lender for lost income (ie income that accrues during the loan transaction and is therefore due to the borrower due to the transfer of ownership, i.e. interest payments , dividends ). This corresponds to the obligation of a borrower in the legal sense to return the borrowed goods "with fruit " when they are returned. The fact that not the same securities are returned is of no economic importance, since securities of the same class of securities are acceptable items . Returning the same papers would often be very time-consuming or even impossible (for example, in the case of papers held in collective custody or value rights ).
Lending market
Lenders are usually large securities dealers, banks, funds and major shareholders. Usually, the lender requires security in the form of money or other securities (secured loan, English collateralised lending).
A distinction is made between principal and agent transactions. In the principal business, a market participant, such as a large custodian bank , takes on the processing of the lending business and acts as a contract partner himself. However, the same market participant can only act as an agent; in this case he is merely an intermediary between the lender and the borrower and takes over the handling of the transaction.
The lender generates additional income through the rental fees. The borrower can use the borrowed papers for various purposes.
Securities lending to optimize returns
Institutional investors and investment companies with large portfolios can improve their returns and lower their custody costs by lending their securities to banks for a fee .
Securities lending for short sales and delivery difficulties
Securities lending are used to meet delivery obligations resulting from short sales . When securities that have just been purchased are resold, lending transactions can be used to bridge differences in the value date or delivery difficulties of the original seller.
Securities lending for refinancing
Borrowed securities can also be used for refinancing . Securities lending is a widespread practice, especially in the bond market , thanks to which market participants can obtain liquidity by selling borrowed securities. Instead of selling the borrowed securities on the market, they can also be used to raise liquidity from central banks as part of open market transactions or in the repo market .
If the lender receives cash security for the borrowed securities, this represents a procurement of liquidity for him. In economic terms, there is no differentiation between a secured loan and a securities repurchase agreement .
Securities lending as an instrument for tax structuring
Since, for example, banks do not benefit from the tax exemption for dividends according to Section 8b KStG, lending securities to beneficiary companies was an easy way to save taxes. The borrower received the 95% tax-free dividend and paid a loan fee to the bank in return, which reduced his tax burden. The benefit for the bank was that the loan fee was slightly higher than the dividend.
This model was abolished from 2007 by Section 8b (10) of the KStG. The lending fee is no longer a business expense for the borrower, which means that there is no longer any overall tax savings.
Securities lending for capital increases
The instrument of securities lending is often used, especially for capital increases . Since new shares first have to be entered in the appropriate registry court and until this entry there is ultimately a residual uncertainty that this will not take place or that it will be delayed, shares borrowed accordingly are often initially issued as "young shares", although they are actually old shares and the actual new shares, once admitted, will be allotted to the lending party as repayment.
Since every application for admission of young shares requires a corresponding publication, but for tactical reasons it is often not desirable to inform the public about the exact time of the capital increase days in advance, the diversion via securities lending is an often chosen option, the capital increase only immediately before to definitely announce their date.
Due to the new FRUG , the publication requirements in this regard have been relaxed a little, so that capital increases can now only take place after the entry in the case of capital increases of up to 10%.
Situation in Germany
Securities lending has existed in Germany since 1990. In Germany, fund companies are subject to legal restrictions with regard to lending from their special assets .
See also
literature
- Georg Acker: Securities lending - basics, processing and risks of a new banking product . 2nd Edition. Wiesbaden, 1995.
- Jörg Ambrosius, Andreas Franz: Securities lending - upswing through new legal freedoms . In: Journal for the whole credit system . Volume 61, Issue 5/2008, pp. 196-198.
- Siegfried Kümpel: The basic structure of securities lending and its legal aspects . In: Securities Communications Part IV . Issue 23 / vol. 44, No. 23, June 9, 1990, pp. 909-916.
- Mike Rinker: Commentary on §§ 200 (securities loan), 201 (securities loan agreement) and 202 (organized securities loan systems) KAGB . In: Beckmann / Scholtz / Vollmer: Investment - Supplementary manual for the entire investment industry, Erich Schmidt Verlag, Berlin, ISBN 978-3-503-13811-1 (electronic resource).
- Johannes Weninger: Securities Lending in Austria . In: Bank Archives . Issue 11 / vol. 42, November 1994, pp. 859-867.
Individual evidence
- ↑ New obligations for capital market transactions
- ↑ Hamburger Abendblatt- Hamburg: Stock lending: A business for fund companies. October 29, 2008, accessed on April 19, 2019 (German).
