The International Securities Lending Association (ISLA) has issued updates in 2019 to the legal clearing notices that support the Global Master Securities Lending Agreement (GMSLA) for securities lending. Updates have only been obtained for jurisdictions that are not EU Member States. As soon as the terms of the UK`s exit from the European Union are sufficiently clear, ISLA plans to update the views of EU member states, including legal advice for England and Scotland. GMSLA is the most widely used model agreement for international securities lending operations and the basis for securities lending activity in many markets. Since the early 1990s, ISLA has provided a standard legal framework for the securities lending industry. GMSLA has become a standard legal agreement in European markets, the latest version being the 2018 version of collateral inter-system security. It was a collaboration between ISLA, its members and Clifford Chance. > Following the collapse of Lehman Brothers, a major borrower, market participants had to go through the liquidation processes in real life. Fortunately, the majority of lenders have succeeded and have not lost, demonstrating the strength of the securities lending activity for actual beneficiaries. However, the importance of collective management has been emphasized as an essential instrument for managing counterparty risk, as well as the need for much greater transparency, particularly in the United States, where some breach of confidence in cash security reinvestment programs has been highlighted. > In the context of the crisis, regulators have begun to conduct a more in-depth review of loans and securities deposits, and a number of them have introduced restrictions on short selling around the world, which has had a negative impact on activity and uncertainty. Some restrictions are still in place at the time of the letter. Two important standard agreements govern the international lending and repo industry: the Global Master Securities Lending Agreement (GMSLA) and the Global Master Repurchase Agreement (GMRA).
Another option in Europe is the use of the European Master`s Agreement (EMA). All of these agreements are described below. In order to minimize the legal risks associated with repurchase and securities lending transactions, there is an urgent need to sign standard agreements that clearly define the rights and obligations of counterparties during the duration of the transaction and in the event of a problem (for example. B delay on the part of one of the parties). It should be noted that, in the context of Lehman`s bankruptcy, these contracts have proven to be robust if applied in a real default scenario. The Global Master Securities Lending Agreement (GMSLA), published by the International Se-curities Lending Association (ISLA), is the model agreement for securities lending on the international market. It is signed between the lender and the securities borrower and sets the terms and conditions of the securities lending transactions that are being processed between the two parties during the contractual life cycle: > securities loans; > delivery; > security (including acceptable form of security and margins); > distribution and corporate shares; > interest on securities and borrowed cash; > delivery of equivalent securities; > non-delivery; > breakdowns and consequences; > taxes; Standard Agreements GMSLA Since then, the market has been facing a huge cash surplus, which has had a significant impact on the lending and repurchase sector as a central liquidity management tool.