Specialists in Change Management

Solvency II for Securities Lending Agents

Understanding how regulatory change may impact your business and having the solutions available to deliver against the requirements is key to managing your business well.

Agent Lenders who lend on behalf of insurance fund clients will have to contend with the new Solvency II regulation’s which is being driven by theEuropean Insurance and Occupational Pensions Authority (EIOPA). Like Basel II for banks this is driving insurance companies to supply large quantities of data to the regulator.

There are three pillars of Solvency II

Pillar 1 ‘Quantitative Capital Requirements’
Pillar 2 ‘Qualitative Supervisory Review’
Pillar 3 ‘Supervisory Reporting and Public Disclosure’

Pillar 3, concerns market discipline and has a provision that means any agent lending securities on behalf of insurance funds will need to supply QRT (Quantitative Reporting Templates) information to the insurance companies for onward provision to the regulator. Two templates D5 for loans trade data and D6 for collateral positions will need to be supplied to insurance clients.

EIOPA requires lenders to supply cumulative daily open loan and returns for every business day and a snapshot of all open collateral positions at year end. 

What are the issues?

In the past many agent lenders have relied on spreadsheets or tactical solutions to supply regulatory data or find that current in-house reporting packages have sufficed. The problem with Solvency II reporting for agent lenders and insurers is that it has additional complexities involved in the gathering and mapping of data that such solutions will not adapt to so readily.  As an example, each individual reported security requires asset identifiers known as CIC codes and balance sheet codes plus other market data attributes not normally held in trading systems by lending agents. Now that agent lenders face so much additional scrutiny from beneficial owners it is incumbent on them to ensure that the data supplied to insurance fund clients is correct in order to protect this discretionary activity and its income stream.

In recent years the majority of agent lending businesses have also moved towards using tri-party agents to collateralise their daily loan positions. Many agent lenders only hold within their systems the total collateral value for each borrower and lending legal entity. This is problematic for Solvency reporting purposes as the actual daily underlying positions of the collateral will need to be communicated to the beneficial owner and regulator.

MX Consulting can help you understand your securities financing business issues and provide a solution that will reduce costs of meeting Solvency II obligations compared with an in-house provisioned solution or an external large scale service provider.

To resolve these issues MX has designed & built ‘Ordinant’, an intra-net web based application that services agent lenders and insurance companies Solvency II requirement and can be white labelled for on-site use.

What does ORDINANT do?

  • Hold your loans, loan return and collateral positions on a cumulative daily basis
  • Utilise for Solvency II and other reporting requirements
  • Intranet Delivered Front End (white label to your business)
  • Collation of data from trading systems, tri-party agents and other third parties
  • Dashboard Datasource Control, Oversight & Transparency
  • Distribution to Multiple Underlying Insurer Clients
  • Securities Enrichment and Data Mapping
  • Audit History
  • Client Tailored Reporting
  • Email Alerts to Users
  • Excel User Outputs
  • Administration Control
  • Security and version control via logon

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