Page 74 - DMGT303_BANKING_AND_INSURANCE

Unit 4: Treasury Management & Banking Sector Reforms

All the three are watertight in their activities. Again these three functional departments have Notes
different personnel to man:
(i) Money Market

(ii) Equity
(iii) Forex
The three Functional Offices are called:
(i) Front office

(ii) Back office and
(iii) Middle office respectively
The Front Office - has the exclusive role in market related activity of buying/selling and/
lending/borrowing.
The Back Office - looks after the accounting and settlement of the transactions carried out by the
Front Office. It also has the responsibility of having a second look at the prices/rates at which
dealers have transacted and how these rates/prices are in relation to market movements.
Research and Risk Analysis Segment Facilities
(i) Scenario evaluations

(ii) Review of counter party limits
(iii) compliance with regulations
(iv) monitoring risk factors
(v) guidance to dealer regarding market movements/developments

4.1.2 Stock Lending

1. Involves transfer of securities/shares for a temporary period in exchange for collateral
which may be securities or cash.
2. It does not involve a sale repurchase but only a loan.

3. Though transfer of title and Noting rights takes place. The benefits of ownership including
dividend and coupon payments remain with the lender.
4. The borrower is legally bound to pass on any benefits received.

5. Securities taken as collateral are marked to market on a daily basis and value of collateral
is required to be maintained.
6. Generally long term investors like insurance companies and pension funds are the lenders
in the market.
7. The assets held by such investors with custodial agencies or clearing houses are used for
stock lending.

8. This is done by a general or specific permission to lend.
9. The additional income supplements the earnings on such blocked investments.

Did u know? Stock lending does not involve a sale repurchase but only a loan.

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