Securities Lending - Request for Information

Securities Lending - RFI



The PBGC participates in a securities lending program administered by its custodian bank whereby the custodian bank lends PBGCs securities to third parties. The custodian bank requires collateral from the borrower that equals 102 percent to105 percent of the securities lent. The collateral is held by the custodian bank. In addition to the lending program managed by the custodian bank, some of the PBGCs investment managers are authorized to invest in repurchase agreements and reverse repurchase agreements. The manager either receives cash as collateral or pays cash out to be used as collateral. Any cash collateral received is invested. The total value of securities on loan at September 30, 2007, and September 30, 2006, was $4.939 billion and $6.352 billion, respectively. Although securities on loan have decreased since September 30, 2006, there continues to be an ongoing demand for securities to lend and varies based on the securities held in portfolio by the PBGC and the market demand to borrow those specific securities. It is reasonable to anticipate that with the recently revised investment policy of the PBGC, there will be meaningful adjustments to the nature of the demand for the restructured portfolios securities.



The amount of cash collateral received for these loaned securities was $5.045 billion at September 30, 2007, and $6.491 billion at September 30, 2006. These amounts are recorded as assets and are offset with a corresponding liability. The PBGC had earned income from securities lending of $6.2 million as of September 30, 2007 and $5.2 million as of September 30, 2006.



As of September 30, 2007, the PBGC loaned out $4.939 billion in securities of approximately $18.210 billion of securities available for securities lending. The PBGC has the ability and right to restrict specific securities from the securities lending program. Currently, it has no such restrictions. In addition, the PBGC has the ability to recall any security on loan.