IMN: Indemnification to ‘change’ 18 September 2014London Reporter: Mark Dugdale
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The increasing cost of indemnification will see agent lenders offering a two-tier pricing structure in the future, heard attendees of the European Beneficial Owners’ Securities Lending Conference in London.
James Day of BNY Mellon said the increasing cost of indemnification will mean that agent lenders will have to offer fee splits with and without an indemnity, to give beneficial owners a choice.
Roelof van der Struik of PGGM Investments said that in the event that indemnification was not offered, it would be a case of measuring the increased risk against what is acceptable.
“We are not against risk—we just want to be rewarded for it,” he explained, adding that if indemnification is removed and risk increases, beneficial owners would want greater returns as justification.
Van der Struik went on to praise indemnification, saying that it gives agent lenders a stake in trades.
He added that an indemnity also puts a lot of pressure on the beneficial owner, because it has to be confident in the agent lender’s ability to complete a trade.
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