ISLA approves amendments to Global Master Securities Lending Agreement 2009

The International Securities Lending Association (ISLA) board has approved amendments to the Global Master Securities Lending Agreement (GMSLA) 2009.

ISLA explained that the changes were as a response to a “small but consistent number of concerns” coming from the securities lending market.

There are two main changes, which ISLA stressed will have no effect on the Set Off or Events of Default provisions laid out in GMSLA 2009 or in the ISLA Securities Lending Set Off Protocol 2009.

Clause 6, whereby borrowers would be required to pay an amount equivalent to the gross amount of the income in the event that they cannot agree with the lender on a manufactured income payment has been removed.

Concerns had been raised that this rule would result in lenders receiving more than they would normally be entitled to receive. Instead, borrowers will have to pay what the lender would have received if it had not lent the securities in the first place.

Clause 6 also provided an optional indemnity from the lender to the borrower aimed at protecting the borrower from losses incurred when it attempts to substitute collateral over record date but the lender prevents them from doing so. Lenders will now be required to “act reasonably”.

Secondly, Clause 5.5 and 5.6, which stipulated that borrowers would have to provide collateral for the value of manufactured income payments due in the future but not yet payable, has been changed. ISLA found that this practice was not common in the market and so the amendment states that parties will be able to include this option if they both agree to it.

GSL.tv will be speaking to Deloitte’s Ali Kazimi to discuss the changes in more detail