What is it like being back at the helm of an agency听lending programme after time with a fintech?听
It feels very natural, to be honest, and I feel I have come back even stronger following my 鈥榮abbatical鈥� from the finance industry working for MarketAxess. I learned a great deal during this time. Spending time on the sell side as a vendor was not only interesting, but learning first-hand how a fintech operates feels like an essential facet of my career given that the future is really about technology, no matter what industry you are in. I have a wonderful team here at Standard Chartered, and their support has been an important factor in making this transition seamless for me.
You鈥檝e described听Standard Chartered as the 鈥渘ew kid on the block鈥� for securities lending. Could you expand on what you mean by that?听
Well, it鈥檚 almost the missing piece in the jigsaw puzzle for Standard Chartered, given our existing prime and repo business. Our clients have been asking us to set this product up for a long time. We go live with our first client this month and we are very excited about that. We are providing a full front-to-back process, partnering with a specialist agent lender with an astounding track record, and a number of differentiating factors, which makes them a really compelling partner.
Working together, our aim is to lead the industry, using our expertise, technology and reach to offer a securities lending solution that is designed for the 21st century. Being the 鈥榥ew kid on the block鈥�, we do not have legacy systems and entrenched processes, so we can deliver products at a significantly reduced time to market, and adapt quickly. We want to take a fresh approach, doing what鈥檚 right for the beneficial owners and the borrower community, and helping them to reduce expenses, become more efficient, and of course, comply with new regulations seamlessly as they are introduced.
SC鈥檚 programme leverages the eSecLending platform. What advantages does that offer you?听
What I found most striking when engaging with eSecLending was how closely aligned the two organisations are, in terms of expertise, culture, and approach to agency securities lending. The combination of our two organisations is very powerful: I see this as a marriage of two perfect halves from a geographical perspective, and our combined footprint is truly global. Added to this, our product suite and financial strength and stability makes us a very prominent player in this space, with a market-leading proposition.
What are your ambitions for the coming year in terms of growing the business?
Firstly, developing an environmental, social and governance (ESG) policy that incorporates Standard Chartered鈥檚 values and principles into the building of our products. We also want to ensure we have a securities lending product that enables our clients to meet their own ESG objectives. Every client will have different priorities and approaches to ESG, so we are building in options and scalability. The aim is to avoid any impact on clients loaned securities, whilst ensuring that clients can quickly implement their ESG criteria in the choice of companies they invest in, effectively by being able to vote on securities. Previously, a common point made to lenders was that they lose the right to vote, so we are adding far more transparency and control. Finally, collateral accepted into an ESG programme would need to be in line with the investment principles of the securities held, and available to lend.
In terms of our business offering, digitisation and automation is central to our delivery strategy at Standard Chartered, and this will continue to be the case. We work with our innovation arm, SC Ventures, and adopt best-in-class third-party technology to accelerate time to market and leverage specialist expertise. The value of this approach became particularly apparent to me during my time with a fintech. There is no point in replicating investment spend; rather, we can focus our efforts on the client-facing aspects of our service delivery, such as connectivity, whether to counterparts, venues or market infrastructure providers, and an excellent client experience. With increasing regulatory requirements and business disruption resulting from COVID-19, efficiency, transparency and automation have become more important than ever, so we are channelling our investment accordingly.
We have spent a lot of time defining a detailed business plan for the next two to three years, that brings together the needs and expectations of our clients with the wider industry changes that are underway, so much of my focus will be on the execution of this plan. That said, this is a fast-changing industry, so it is important that we stay flexible and embrace new opportunities with a growth mindset - and even enjoy them when they arise!
Throughout my career, I have been very conscious that no individual or organisation operates in isolation. By working together, and embracing diverse viewpoints and experiences, we can achieve more. Industry associations play an important role in this. As a result, I have held a number of industry positions, most notably as CEO and chair of the Pan Asia 色花堂Lending Association (PASLA) between 2004 and 2008. As we build the securities lending business within Standard Chartered, I also want to ensure that we are proactive in supporting PASLA, among other organisations that make such a substantial contribution to our industry, including securities lending trade bodies globally, along with the International Capital Market Association.
You鈥檝e also said agents need to work harder for their revenue in an environment听of squeezed margins. What is SC doing to work harder for clients?听
Gone are the days when clients were simply signed up, assets were admitted into a lending programme, traded daily and revenues paid monthly. Firstly, all stakeholders need full transparency and confidence in robust risk management and operational processes. Secondly, we are now seeing a number of initiatives that have been discussed across the industry for some time come to life. This includes common domain models, smart buckets, accurate look-forward and back evaluations, transparent and thorough service reviews, and entry into new markets, such as Saudi Arabia, Indonesia and China. For example, we took the lead as a custodian bank to assist a large overseas institutional investor to complete a stock borrowing deal in the A-share market on the first day of the听QFII/RQFII听stock borrowing trading in the Shanghai and Shenzhen markets. This also marked the first stock borrowing deal by听QFII听in the market, following the release of the 鈥楳easures for the Administration of Domestic 色花堂and Futures Investment by听QFII/RQFII鈥� by the regulators.
Looking out at the wider market, what are the trends you see being carried听over from 2020 or emerging this year?听
Eyes are on China, with lendable assets growing at a rapid rate. We have an important role to play in supporting and enabling this expansion, leveraging the core elements of our programme which differentiate us from others. This includes the auction process we deliver with our partners eSecLending of assets which make sizeable premiums, given our ability to generate additional alpha where others cannot. There are other trends too, however, that will continue to influence and shape the securities lending market. Growth into new markets is one dynamic, but in addition, we are seeing developments on more flexible collateral, new trade types, and how best to support changing regulatory requirements. Most importantly, however, I would emphasise the growing role that ESG will play in this industry, shaped by banks such as Standard Chartered which has sustainability and responsibility at its core.
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