FAQ · Securities lending
Frequently Asked Questions About Securities Lending
Short, practical answers to the questions newcomers and trustees ask most about securities lending worldwide.
Last reviewed 27 October 2026
The basics
A temporary transfer of securities from a lender to a borrower against collateral and a fee. The borrower must return equivalent securities on demand or at the end of the agreed term.
To cover short sales, hedge other positions, support market-making or avoid settlement failures.
Legal title usually transfers to the borrower, but the lender keeps the economic exposure and is entitled to equivalent securities and manufactured income.
Collateral and risk
Cash, government bonds and, increasingly, equities. Each lender sets an eligible collateral schedule with haircuts and concentration limits.
Loans and collateral are revalued daily. If collateral value falls below the agreed margin, the borrower must post more; if it rises, excess may be returned.
The lender, or its agent, sells the collateral and buys back the securities. Many agents provide an indemnity covering any shortfall from borrower default.
Income and entitlements
Fees, and any reinvestment return on cash collateral, are split between the beneficial owner and the agent lender in an agreed ratio negotiated in the agency agreement.
The borrower pays the lender a manufactured dividend equal to the dividend paid. Tax treatment may differ from receiving the dividend directly.
Only if you recall the shares before the record date. See our ESG and stewardship guide for recall planning.