During a panel at the IMN's 24th Annual Beneficial Owners' International Securities Finance & Collateral Management conference, Datta advised beneficial owners on how to safeguard their assets and avoid unnecessary risk.
Datta suggested that this can be done by looking into the borrower’s credit rating, obtaining information about their balance sheet or conducting own analysis.
According to Datta, indemnity is critical to consider before starting the securities lending programme.
Datta notes that agent lenders sometimes don’t specify what is covered in the indemnity.
Another important element for a beneficial owner to deal with is whether cash or non-cash will be accepted as collateral.
Setting the duration of lending is another issue not to neglect, according to Datta.
He also recommends that beneficial owners should make sure they have a strong legal and service level agreement with the lending agent in which all the conditions are clearly set.
He reminded attendees of the panel that the responsibility lies in the hands of the beneficial owner.