Simplify the industry or alienate new markets, says Fortis' Moursy

The securities lending industry must become simpler and more transparent if it is going to break into emerging markets, according to Mohamed Moursy of Fortis Nederlands.

At the second GSL Summit held last week in London, entitled 'Lending For Liquidity', Moursy, whose bank is a leading borrower of assets in Europe, told the second conference panel of the need for a back to basics approach in the industry that includes a single system of legal documentation and a more balanced attention to borrowers.

"The last 12 months have been very trying and testing for the industry and it highlighted a lot of things we need to focus on as borrowers. There's a lot of talk about lenders' risks and lenders' problem. But no one looks after the demand side - 'what's the borrowers' risks?'

"That's what I wanted to highlight, about legal documentation the industry is using regarding collateralisation of borrow positions, the data we use to represent our industry with the regulators [and] with investors. So I tried to focus on what we need to do to simplify things and make them more transparent."

Market reform had been far from the agenda in the bull market years, he added, because money and strategies were cheap to come by. But the need to focus on the fundamentals of the industry and develop a unified set of standards and rules has implications for its success in emerging markets.

"If we can't simplify the rules for Western investors - to attract educated investors to our business and get them on our side - what chance do we have in emerging markets? What are we going to do if we want to get people in Taiwan and Malaysia to lend, or in South America?

"We need to go back to the drawing board and think what documentation we use, what rules we play buy and how we sell our image."

He added that a central counterparty would increase market transparency and help mitigate risk, although the concept is still "a work in progress". "The whole market will have to really support the initiatives, invest in it, encourage it and the provider of the CCP needs to also understand the industry better."