39 words and two sentences on stock lending in Pre-Budget Report

The UK Treasury devoted just 39 words to securities lending in its Pre-Budget Report, submitted to the House of Commons yesterday by Alastair Darling, Chancellor of the Exchequer.

In the chapter entitled ‘Reforming incentives and governance in finance sector firms’ - after summarised recommendations on corporate governance from Sir David Walker - article 3.39 states: “The FSA has been reviewing the governance and risk management of stock lending in the market. The Government welcomes this work and will work with the FSA and market participants as necessary to help develop thinking in this area.”

The government has been relatively quiet on its plans for the securities lending industry, but the Conservatives – tipped by many observers to win power in 2010 – have also been tight lipped on their exact policy.

The party has suggested that it would remove the tri-party system of financial governance if it wins power, effectively closing the Financial Services Authority (FSA) and potentially cancelling any regulations made by that body.

However, at the GSL End of Year Summit in London on 27^th November, shadow Treasury minister Greg Hands told the conference: “I would not expect that the role of the Bank of England for example would be to immediately undo everything the FSA had done – I think it would be to develop that.”

On a potential short selling ban, Hands said: “There could be circumstances where we would support it.

“We are not opposed to there being a statutory basis behind banning short selling but we are doubting whether the current ability to restrict short selling is sufficient or not.”