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Casla preview: Rob Ferguson, CIBC Mellon
06 May 2014
Casla president Rob Ferguson tells Stephanie Baxter why Canadian securities lending participants should be
worried about global regulation ahead of his association’s annual conference on May 8
Pressure is mounting on banks to figure out how to use their
capital more efficiently as the path to Basel III grows closer.
The increasing threat of international regulations will be
particularly evident at the Canadian Securities Lending
Association’s (Casla) conference on May 8, which
will bring together both Canadian and non-Canadian securities
lending market participants to discuss challenges and
As Rob Ferguson, Casla president and senior vice-president of
capital markets at CIBC Mellon, says: "Global regulatory change
will be the biggest talking point at the conference. There will
be some focus on local changes, but they are really dwarfed
when you compare them to what else is going on in the world.
Most of the regulatory change that has been affecting Canadian
market participants has been from the US and, to some extent,
Europe, with things like the financial transaction tax (FTT),
Although the proposed FTT for 11 European member states still
has many hoops to jump through before being finalised, Ferguson
says it has already had an impact on Canadian lenders.
"The FTT is really putting a damper on demand for European
borrowing, which historically has been a very large part of
Canadian beneficial owners’ revenue streams. As a
result lenders and borrowers are moving their focus away from
Europe a little bit and looking at new markets such as Brazil
and the Far East to find other opportunities."
In Canada, regulatory activity has been comparatively light.
Ferguson notes the only major change has been to broaden the
definition of qualified securities – securities that
are allowed to be lent – to include non-Canadian
exchange traded funds (ETFs) and real estate investment trusts
"It has had a positive impact by including all the
exchange-traded assets and therefore creating new supply and
As global securities lending goes through a rough patch,
Canadian agent lenders are doing better than some of their US
and European peers. Many Canadian banks weathered the credit
crisis with robust balance sheets.
"If you have a relatively stronger balance sheet, then you have
an opportunity to grow where others might not be able to or
even need to optimise balance sheet usage. As a consequence
there has been a push from Canadian banks into the US and some
are looking towards Europe and South America."
Indeed, local banks such as Maple Bank and BMO have
increasingly penetrated the US market as the biggest US banks
struggle to meet stringent new capital and counterparty
"At a time when everybody is selling, there is a great
opportunity to buy, which is where the Canadian banks are
today," adds Ferguson.
Local securities lending agents benefit from strong demand for
fixed income lending. Ferguson says: "Demand for Canadian fixed
income is high and probably at record highs."
This trend is partly due to Canadian sovereign debt being one
of the few able to hold on to an AAA rating, as the country
having weathered the credit crisis much better than most
"Our [CIBC Mellon’s] programme is hitting highs
for the amount that is on loan versus cash and I believe the
Canadian market is stronger overall. It is really more of a
supply issue here than demand." Demand in the equity market,
however, had been 'relatively flat’ and "general
collateral lending has remained the same but there has been a
lack of real specials".