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									Agency Lending Disclosure Taskforce – Credit Group Notes from 2005


                      ALD Credit Group Meeting Notes from 2005

Table of Contents

ALD Credit Group Call December 15, 2005 ...................................................................... 2
ALD Credit Group Call December 1, 2005 ........................................................................ 4
ALD Credit Group Meeting, October 27, 2005 .................................................................. 6
Credit sub-group meeting September 26, 2005 .................................................................. 8
Credit Working Group Meeting on credit limits (2nd meeting) September 21, 2005 ......... 9
Credit Group - Credit limits call September 14, 2005 ...................................................... 11
Capital/Credit Group Call Sept. 8, 2005 ........................................................................... 13
Credit Working Group Meeting Summary 3/17/05 .......................................................... 16




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Agency Lending Disclosure Taskforce – Credit Group Notes from 2005




ALD Credit Group Call December 15, 2005
Participants:
    1.    Walsh, Ray, ABN Amro Bank                   20.   Frayer, Becky, HBK
    2.    O'Conner, Rosemary, Banc of America         21.   Shearer, Kathy, HBK Investments
    3.    Berliner, Ed, Bank of America               22.   O'Neal, Mary, JPM
    4.    Andersen, Srisupen, Bank of Montreal        23.   Pedreira, Frank, JPM
    5.    Hruska, John, Bank Of Montreal              24.   Steuart, Henry, JPM
    6.    Balack, Chandra, Barclays Capital           25.   Yang, Charis, Lehman Brothers
    7.    Yee, Ming, Barclays Capital                 26.   Barnes, Mia, Mellon Financial
    8.    Martinez, Johanna, Bear Stearns             27.   Joy, Brian, Melon Bank
    9.    Auer, Leann, BGI                            28.   Chen, Jimmy, Merrill Lynch
    10.   Kind, Mariana, Capco                        29.   Berschadsky, Judy, Nomura Securities
    11.   Yen, Wayne, Charles Schwab                  30.   O'Meara, Bill, Northern Trust
    12.   Forsyth, Ray, Citigroup                     31.   Stankiewicz, Elaine, Northern Trust
    13.   Adler, Rick, CSFB                           32.   Werkheiser, Amy, Pershing
    14.   Okafor, Emeka, CSFB                         33.   Wellington, Scott, SunGard
    15.   Gilani, Abbas, CSFB                         34.   Agwu, Emeka, Timber Hill
    16.   Lewis, Kevin, Dresdner                      35.   Laichtman, Arthur, UBS
    17.   Mclellan, Alden, Goldman Sachs              36.   Smith, Stephen, Wachovia
    18.   Moy, Nancy, Goldman Sachs                   37.   Adams, Shannon, Wachovia Bank
    19.   Schick, Sharon, Goldman Sachs



Summary:

1. Summary of credit sessions of ALD Forum

The discussions focused on the quality of data received by broker-dealers for re-approval
of principal lenders. Agent lenders were encouraged to send out as many details as
possible. Brokers agreed that they will ask for additional data before rejecting a principal
for lack of data; this will facilitate the process on the agent side, and prevent agents from
having to send a delete and another add file.

One of the issues discussed concerns a request from some agent lenders for brokers to
approve or reject all principals in their program, and not just some principals.
The general consensus in the room was that this is an unreasonable request, and those
lenders will have allow brokers to break out the principals. Several agents noted that
there is no reason why agent lenders should not be able to split up their programs.

2. Open questions

   Handling of multinational organizations in the incremental add/delete file: the issue
    concerns multinational entities, which do not have one country of incorporation.




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Agency Lending Disclosure Taskforce – Credit Group Notes from 2005


The solution is to include on the "Address 1" field the word "multinational" which would
indicate to brokers that this was a multinational entity. The rest of the mandatory address
fields would be completed with N/A and the country code would be '00'
The agent will fill in the optional fields for principal place of business.

Several broker-dealers will conduct internal research on whether this is acceptable to
them and come back to the group.

   Credit limit breaches: if the broker has requested a reduction in the loan, how will the
    agent lender ensure that they are reducing the allocation for that specific principal for
    which the broker is over the limit? Will there be a system to match that? Brokers
    suggested that is something that should be done on the lender side. Further
    discussions on this topic are required.

      The next Credit group call is scheduled for December 22 at 1:00 pm EST




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      Agency Lending Disclosure Taskforce – Credit Group Notes from 2005




      ALD Credit Group Call December 1, 2005
      Participants:
1.    Josh Neto, Abby National                              26.   Cara Fischer, JP Morgan
2.    Hiromi Otsuka, Banca IMI Securities                   27.   Mary O'Neill, JP Morgan
3.    Rosemary O'Conner, Bank of America Securities         28.   Henry Steuart, JP Morgan
4.    Therese Supin, Bank of Montreal                       29.   Tom Cummings, JP Morgan
5.    Chandra Ballack, Barclays Capital                     30.   Frank Padrera, JP Morgan
6.    Ming Yee, Barclays Capital                            31.   Ms. Tan Fisher, JP Morgan Chase
7.    Joanna Martinez, Bear Stearns                         32.   Jimmy Chen, Merrill Lynch
8.    Leeann Auer , BGI                                     33.   Ms. Tracey Linz, Mizuho Securities
9.    Mariana Kind, Capco                                   34.   Stephanie Hahn, Morgan Stanley
10.   Christina Iavaroni, CIBC                              35.   Xavier Kunukkasseril, Morgan Stanley
11.   Patrick Burka, CIBC                                   36.   Judy Berschadsky, Nomura Securities
12.   Chang Haung, CIBC                                     37.   Elaine Stankewicz, Northern Trust
13.   Maria Bonamico, CIBC World Markets                    38.   Joe McCarthy, Pershing
14.   Ray Forsythe, Citigroup                               39.   Amy Workheiser, Pershing LLC
15.   Ann Klein, Citigroup                                  40.   Michael Dunn, Pomona
16.   Andrea Wlaker, Citigroup                              41.   Steve Bartallo, Raymond James
17.   Rick Adler, CSFB                                      42.   Scott Wellington, Sun Gard
18.   Kevin Lewis, Dresdner                                 43.   Emeka Agwu, Timber Hill
19.   Nick Watterson, Dresdner                              44.   Arthur Laichtman, UBS
20.   Bill Koster, Fortis                                   45.   David Smelser, UBS
21.   Alden McClellan, Goldman Sachs                        46.   Stephen Smith, Wachovia
22.   Nancy Moy, Goldman Sachs                              47.   Brad Clark, Wachovia
23.   Sharon Shick, Goldman Sachs
24.   Anita Siu, Goldman Sachs
25.   Colleen Kenney, Investors Bank


      Summary:

          1. Announcements and updates –

      Meeting with Regulators
      On November 22, representatives from the taskforce met with SEC and NYSE to provide
      them with an update as well as request an extension to the current project plan.

      The group presented strong arguments to the regulators that the proposed plan is
      appropriately aggressive and realistic. Regulators said they will review the plan and get
      back to the group within a week or so. As soon as there is an update, it will be
      communicated to the entire taskforce.

      ALD Update Conference, December 13th

      The ALD Update Conference will take place on December 13th in New York. Space is
      limited to 100 participants, and the list is almost full. Taskforce members interested in
      participating should contact Mariana Kind immediately.


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Agency Lending Disclosure Taskforce




        The agenda will be split between credit related issues in the morning and capital related
        issues in the afternoon. Topics will include quality of data for re-qualification,
        confidentiality agreements, credit exposure monitoring, etc.

        If anyone has a topic they would like to see covered, they should send it to the PMO
        immediately for consideration.

        A detailed agenda will be posted during the week of December 5th.

            2. Underlying fund names issue

        Broker/dealers on the call confirmed that they need to see the information on the
        underlying funds, with their names and tax ID, and not just the name of the “family
        fund.” Brokers expect to see the same on the daily file for principal allocations. Several
        lenders on the call confirmed that they can provide that information and that for the
        incremental file, the family name of the fund will be provided in the “parent” field.

            3. Multinational organizations' address issue

        Northern Trust raised the question on what to put in the “address of incorporation” fields
        for multinational organizations. Currently they will put “00” for country, and provide the
        “address of business” as there may not be an address of incorporation for an organization
        such as the UN.
        Northern Trust will get back to the group with more details on this issue.

            4. Should exclusive accounts be provided for re-qualification?

        A question was raised whether exclusive relationship principals should be sent through
        the ALD credit approval process. The consensus from the group is that agent lenders
        should send all of their principals through the incremental file. It is up to broker dealers if
        they will separate the exclusive once they receive the information.


            5. Screening for AML/CIP vs. waiting for an exemption?

        Broker/dealers were asked whether they are currently performing AML/CIP checks on
        principals while waiting for the regulatory relief. Firms are encouraged to send that
        information to Mariana Kind; the statistics will be used in the AML discussion during the
        ALD update conference on Dec. 13th.


                The next Credit Group call will take place on December 8th at 1:00 pm




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Agency Lending Disclosure Taskforce



        ALD Credit Group Meeting, October 27, 2005
        Participants:
      1.    Neto, Josh, Abbey National                       32. Aprea, Johnny, HSBC Securities
      2.    Walsh, Ray, ABN Amro Bank                        33. Belo, Anthony, HSBC Securities
      3.    Geffen, David, Amaranth Group Inc.               34. Nowicki, Peter, HSBC Securities
      4.    Pestritto, Lauralyn, Amaranth Group Inc.         35. Porzio, Raymond, HSBC Securities
      5.    Bader, Celia, Banc of America                    36. Yao, Alice, HSBC Securities
      6.    Berliner, Ed, Banc of America                    37. Angelico, Tony, ING
      7.    O'Connor, Rosemary, Banc of America              38. Johnson, Ron, Jefferies and Co.
      8.    Otsuka, Hiromi, Banca IMI Securities             39. Dicesare, Michael, JP Morgan
      9.    Andersen, Srisupen, Bank of Montreal             40. O'Neill, Mary, JP Morgan
      10.   Lacombe, Joelle, Bank of Montreal                41. Bickel, Annette, JPMorgan
      11.   Joseph, Suresh, Bank of New York                 42. Pedreira, Frank, JPMorgan
      12.   Slocumbe, Vivian, Barclays Capital               43. Campos, Vaughn, Lehman Brothers
      13.   Yee, Ming, Barclays Capital                      44. Yang, Charis, Lehman Brothers
      14.   Martinez, Johanna, Bear Stearns                  45. Seales, Carl, Merrill Lynch
      15.   Jarrett, Dan, Calyon Securities                  46. Wagoner, Karen, Merrill Lynch
      16.   Kind, Mariana, Capco                             47. O'Hara, Tim, Mizuho Securities
      17.   Smith, Bradley, Capco                            48. Graffeo, Maryjo, Morgan Stanley
      18.   Bonamico, Maria, CIBC World Markets              49. Hahn, Stephanie, Morgan Stanley
      19.   Caraccio, Lou, CIBC World Markets                50. Halliwell, Dennis, Morgan Stanley
      20.   Klein, Ann, Citigroup                            51. Kunukkasseril, Xavier, Morgan Stanley
      21.   Walker, Andrea, Citigroup                        52. Berschadsky, Judy, Nomura
      22.   Gilani, Abbas, CSFB                              53. Omeara, Bill, Northern Trust
      23.   Petit, Anne, Deutsche Bank                       54. Stankiewicz, Elaine, Northern Trust
      24.   Lewis, Kevin, Dresdner                           55. Werkheiser, Amy, Pershing LLC
      25.   Watterson, Nick, Dresdner                        56. Eckland, Wayne, Society General
      26.   Zhang, Hearst, Dresdner                          57. Setyon, Andre, Sungard
      27.   McLellan, Alden, Goldman Sachs                   58. Wellington, Scott, Sungard
      28.   Moy, Nancy, Goldman Sachs                        59. Laichman, Arthur, UBS
      29.   Nelson, Les, Goldman Sachs                       60. Succetti, Brigitte, UBS
      30.   Schick, Sharon, Goldman Sachs                    61. Smith, Stephen, Wacovia Corp.
      31.   Siu, Anita, Goldman Sachs

        Summary

        1. Announcements and updates
        There has been no update on the deadline to complete the re-qualification process.
        However, the SEC has come back to the taskforce with approval of all three proposals,
        and has suggested several possible days for the steering committee to meet with them and
        propose a new implementation schedule.

        On the issue of reconciliation, the SEC has a strong preference that firms complete a
        daily reconciliation process to ensure the integrity of the data coming from their agent
        lenders. This view was expressed in light of the fact that agent lenders have warned that
        on occasion they may send a file where the total loan amount does not match the sum of
        the amounts for each underlying principals.

        Some broker dealers expressed concern as to whether they should continue to borrow
        from unapproved principals beyond Oct. 31st. Conversations with the SEC indicate that


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Agency Lending Disclosure Taskforce Credit Group Meeting Notes - 2005


      regulators will not publish anything in writing regarding actions beyond this date. If
      examined, firms are encouraged to demonstrate what they have done to date.


      2. Proposal for handling situations where a borrower has exceeded a credit line
      Broker Dealers on the call agreed with the proposal for handling situations where a credit
      limit has been exceeded. Language will be added to the proposal to indicate that the
      credit desk of the broker dealer can notify the trading desk that a call for re-call will be
      coming from the agent lender, without revealing any information on which principals the
      re-call will affect.


       The next credit group meeting will take place on November 3rd, combined with the
         infrastructure group to cover specific technical issues related to the credit file.




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Agency Lending Disclosure Taskforce Credit Group Meeting Notes - 2005




      Credit sub-group meeting September 26, 2005
      Participants:

          1.    Johanna Martinez, Bear Stearns              11.   Dennis Halliwell, Morgan Stanley
          2.    Grant Stewart, BGI                          12.   Stephanie Hahn, Morgan Stanley
          3.    Leann Auer, BGI                             13.   Xavier Kunukkasseril, Morgan Stanley
          4.    Mariana Kind, Capco                         14.   Angie Myers, Northern Trust
          5.    Sharon Scheck, Goldman Sachs                15.   Bill O'Meara, Northern Trust
          6.    Anita Siu, Goldman Sachs                    16.   Elaine Stankiewicz, Northern Trust
          7.    Nichol Bramwell, Goldman Sachs              17.   Brian McLoone, State Street
          8.    Frank Pedreira, JP Morgan                   18.   Rob Toomey, TBMA
          9.    Henry Stewart, JP Morgan                    19.   Stephen Smith, Wachovia
          10.   Ron Campos, Lehman Bros.

      Summary:

      The group felt that the exercise of sizing up the problem with going over assigned credit
      limits would be a useful one.

      The conclusion is that each of the four participating agent lenders will put together a
      report with the names of all the underlying principals for each broker/dealer and market
      value of securities on loan for each one.
      To keep the exercise simple, collateral information will not be included. It will be
      assumed that each loan was collateralized at 102% or 105%.

      All principals loaning to a given broker will be included in the report.
      Agent lenders will attempt to construct reports for June 30th, so the information is
      consistent.

      Agents are expected to transmit the information to the 6 participating brokers by Oct. 3rd.

      This group will re-convene on October 7th to review the results.




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Agency Lending Disclosure Taskforce Credit Group Meeting Notes - 2005




      Credit Working Group Meeting on credit limits (2nd
      meeting) September 21, 2005
      Participants:

          1.    Petric, David, Abbey National              22.   Nelson, Les, Goldman Sachs
          2.    Pestritto, LauraLyn, Amaranth Group        23.   Schick, Sharon, Goldman Sachs
          3.    Berliner, Ed, Banc of America              24.   Siu, Anita, Goldman Sachs
          4.    O’Connor, Rosemarie, Banc of America       25.   Marusa, Dean, HBK
          5.    Otsuka, Hiromi, Banca IMI                  26.   Rozman, Kim, HBK
          6.    Bandilla,Dean, Barclays Capital            27.   Pedrira, Frank, JPM
          7.    Slocombe, Vivian, Barclays Capital         28.   Stewart, Henry, JPM
          8.    Yee, Ming, Barclays Capital                29.   Taboas, Alex, JPM
          9.    Martinez, Johanna, Bear Stearns            30.   Campos, Vaughn, Lehman Brothers
          10.   Steward, Grant, BGI                        31.   Bowden, John, Mitsubishi Securities
          11.   McIntire, Tred, Boston Global Adv.         32.   O'Hara, Timothy, Mizuho Securities
          12.   Jarrett, Daniel, Calyon Securities         33.   Hahn, Stephanie, Morgan Stanley
          13.   Smith, Bradly, Capco                       34.   Samori, Ray, Nomura
          14.   Kind, Mariana, Capco                       35.   Meyers, Angie, Northern Trust
          15.   Caraccio, Lou, CIBC                        36.   Stankiewicz, Elaine, Northern Trust
          16.   Donato, Joseph, Citigroup                  37.   McDermott, Jessica, State Street
          17.   Giardina, John, Citigroup                  38.   Stoia, Larry, Sumitomo Trust
          18.   Walker, Andrea, Citigroup                  39.   Toomey,Rob, TBMA
          19.   Gilani, Abbas, CSFB                        40.   Succetti, Bridgette, UBS
          20.   Kaye, Debra, Daiwa                         41.   Kim, Linda, UBS
          21.   Luis, Kevin, Dresdner                      42.   Smith, Stephen, Wachovia Corp.

      Summary:

      The group began by discussing how to handle situations where there has been an over-
      line on a credit limit set by a borrower for a given principal lender.

      Firms expressed the view that they do not have data on how often such situations occur.
      One of the concerns of broker dealers is with confidentiality agreements which specify
      that information on principal lenders cannot be shared with the front desk. This may
      oblige brokers to use their credit departments to communicate to agent lenders when an
      exposure needs to be reduced and a re-allocation made. This makes the credit
      departments act in a trading capacity. Several brokers were not comfortable with such
      situation. There is also confusion as to who at the agent lender will handle this, whether
      it is their trading desk or their credit department.

      An additional complication arises from the fact that there could be problems with the
      allocation/re-allocation of non-cash collateral.

      Several suggestions were made regarding possible processes for handling communication
      of over-line loans.




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Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005


      One suggestion was for borrowers to have “code names/numbers” for principal
       lenders, but since every broker may set up a different type of “code name” to have
       a central system for assigning this code or dummy ID to principal, so that all
       principals end up with universal dummy ID. Given the complexity encountered
       with the pseudo tax ID tool set up by DTCC, this proposal was quickly turned
       down.

      Another proposal was to have credit limits set up at the lender’s level and have
       lenders monitor those. While this had been turned out in the past, during the call
       some agents seemed open to discuss this possibility, while other confirmed that
       they do not possess the capability to build the technology to handle this.

      A third suggestion was for broker dealers credit departments to communicate with
       the Agent Lender’s trading desk or operations department, which will then contact
       the broker’s trading desk to make a re-allocation. However, that puts a burden on
       the agent lender to manage the BD’s portfolio and some lenders may not be
       comfortable with this scenario.

There were a lot of questions surrounding all proposals (e.g. auto-borrows, sharing of
limits with a counterparty, etc), therefore a decision was made for a smaller group of
broker dealers and agents to get together and perform an exercise to “size up the
problem” before any complicated solutions are undertaken.

A sub-group will be set up to develop an appropriate way to size the issue, and will come
back to the larger group with results.

Another credit call has been scheduled for Wednesday September 28th.




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Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005




Credit Group - Credit limits call September 14, 2005
Participants:

   1.    Josh Neto, Abbey National                   24.   Anne Petit, Deutsche Bank
   2.    Ray Walsh, ABN AMRO Bank                    25.   Josette Milo, Diawa Securities
   3.    Ed Berliner, Bank of America                26.   Keven Lewis, DRKW
   4.    Srisupen Anderson, Bank of Montreal         27.   Nick Watterson, Fredner
   5.    Duncan Roland, Bank of Montreal             28.   Matthew Olson, Goldman Sachs
   6.    Vivian Slocombe, Barclays Capital           29.   Steve Marusa, HBK
   7.    Dean Bandilla, Barclays Capital             30.   Tony Angelico, ING
   8.    Ming Yee, Barclays Capital                  31.   Henry Stewart, J.P. Morgan
   9.    Joanna Martinez, Bear Sterns                32.   Mary O'Neill, J.P. Morgan
   10.   Daniel Jarrett, Calyon Securities           33.   Don Wolf, Jefferies
   11.   Frank Armocida, Calyon Securities           34.   Alex Tabois, JP Morgan
   12.   Mariana Kind, Capco                         35.   Vaughn Campos, Lehman Brothers
   13.   Bradly Smith, Capco                         36.   Charis Yang, Lehman Brothers
   14.   Wayne Yen, Charles Schwab                   37.   Stephanie Hahn, Morgan Stanley
   15.   Lou Caraccio, CIBC World Markets            38.   Dennis Hallowell, Morgan Stanley
   16.   Ray Forsythe, Citigroup                     39.   Xavier Kununkasseril, Morgan Stanley
   17.   Maria Gagliardi, Citigroup                  40.   Ray Samori, Nomura
   18.   Ann Kline, Citigroup                        41.   Elaine Stankiewicz, Northern Trust
   19.   Myra Miller, Citigroup                      42.   Angie Meyers, Northern Trust
   20.   Katherine Bohnacker, Citigroup              43.   Scott Wellington, Sungard
   21.   Rick Adler, CSFB                            44.   David Smelser, UBS
   22.   Abbas Gilani, CSFB                          45.   Brad Clark, Wachovia
   23.   Deborah Kaye, Daiwa                         46.   Tim O'Hara, Mizuho Securities



Summary:

Discussion began with the question on whether broker/dealers plan to put individual
credit limits for each principal lender.

Firms shared the different methodologies they are considering to use in setting up limits.

Most firms are going to set limits and the principal level. Some are creating risk factor
categories and default limits, and probability of default. E.g. an ERISA Pension Fund
with XX amount of assets or capitalization is likely/not likely to default. Thus they would
avoid having to set limits for each and every individual principal, but will have “buckets”
of principals bundled together.
Accounting for the probability of default will help with setting up EAD (exposure at
default) using the industry specification. Further, accounting for entity types is also
consistent with Basel requirements.

Another method some brokers are using is to set up limits at the agent lender level and
sub-limits at the principal level.



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Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005


Yet another one is to use concentration limits, where a firm would evaluate the
underlying security and compare what quantity of that is against any particular principal.

Other brokers agreed that they will use similar approaches.

In terms of financial information on principal lenders, JP Morgan reported that they have
asked for and were pleasantly surprised by the number of agents willing to provide it.
However, as no “live” files have been exchanged yet, there was no evidence that the
lenders were in fact providing the financial fields.

A question was raised whether the group should attempt to develop a standard approach
across the industry and present that for approval to the regulators. Most firms disagreed
with this suggestion as they felt that it would very difficult and time consuming to
develop a standard approach. Even if the group is able to do that, some firms will be put
at disadvantage as this standard may differ substantially from other current policies that
they employ in similar lines of business within their firm.

It was suggested that as long as a firm has an approach that is rational and consistent with
other policies that should be sufficient for SEC requirements.

Several questions were not discussed in depth and were left for further discussion,
including how to handle crisis situations (i.e. credit dep’t goes directly to agent lender or
goes through trading desk), and specifics about daily monitoring.

The group decided that a follow-on discussion will be useful.


Another meeting on credit limits has been set for Wednesday Sept. 21st at 12:00 pm
                                 Details to follow.




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Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005




Capital/Credit Group Call Sept. 8, 2005
Participants:

   1.    Josh Neto, Abbey National                 27.   Nancy Moy, Goldman Sachs
   2.    John Reswow , Abbey National              28.   Pat Hurley, Goldman Sachs
   3.    John Sanfratello, Abbey National          29.   Alden McLellan, Goldman Sachs
   4.    Kevin Galvin, ABN AMRO                    30.   Anita Siu, Goldman Sachs
   5.    Rosemary O'Conner, Banc of America        31.   Rabih Ramadi, Goldman Sachs
   6.    Charles DiVoula, Bear Stearns             32.   Les Nelson, Goldman Sachs
   7.    Steve Polimini, Bear Stearns              33.   Steve Marusa, HBK
   8.    Joanna Martinez, Bear Sterns              34.   Patrick Festino, ING
   9.    Tred McIntire, BGA                        35.   George Rodriguez, ING
   10.   Doug Phythian, BGI                        36.   Jenny Sabol, JP Morgan
   11.   Frank Armocida, Calyon                    37.   Henry Steuart, JP Morgan
   12.   Mariana Kind, Capco                       38.   Robert Chao, JP Morgan
   13.   Bradly Smith, Capco                       39.   Alex Tiboas, JP Morgan
   14.   Erica Granger, Citadel Investment         40.   Vaughn Campos, Lehman Bros.
         Group                                     41.   Charis Yang, Lehman Brothers
   15.   Eric Levin, Citigroup                     42.   Linda Tabizon, Met West Securities
   16.   Omar Ozten, Citigroup                     43.   MaryJo Graffeo, Morgan Stanley
   17.   Prashant Chindawar, Citigroup             44.   Xavier Kunukkasseril, Morgan Stanley
   18.   Jim Bretado, Country Wide Sec. Corp.      45.   Bob Moserowitz, Nomura
   19.   Abbas Gilani, CSFB                        46.   Elaine Stankiewicz, Northern Trust
   20.   Simon Donouzjian, Deutsche Bank           47.   Kevin Garvey, Raymond James
   21.   Ann Petit, Deutsche Bank                  48.   Phillip Petrosky, RBS Greenwich
   22.   Michael Concannon, Deutsche Bank                Capital
   23.   Barbara Brooks, Dresdner                  49.   Brian McLoone, State Street
   24.   Dan Dougherty, Equilend                   50.   Steven Smith, Wachovia
   25.   John Tew, Frost Bank                      51.   Emmy Yee, Wachovia
   26.   Tom Hasselman, Goldman Sachs              52.   Robert Scala, Wachovia

Treatment of “disclosed/exclusive” accounts

Definitions: Disclosed: accounts where the identity of the principal is revealed to the
broker/dealer’s trading desk at time of trade.
Exclusive: accounts where the broker may have an exclusive relationship with a principal
through a lender, and can request to borrow certain securities from that principal.
See Annex A for more details.

Issue: Most broker dealers were under the impression that they will only receive
information regarding undisclosed accounts through the ALD system, since they would
have already booked the disclosed/exclusive through the trading desk. Most Agent
Lenders, however, planned to send both disclosed and undisclosed accounts that way.
This would lead to a confusion within the broker and possibly “double counting” of the
disclosed/exclusive loans.




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Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005


Solution: Based on discussions last week (see notes under capital group), both agent
lenders and broker dealers agreed on a solution for representing the information on loans
with disclosed or exclusive relationship principals. The agent lenders would add a field
to the daily loan file to “flag” the disclosed accounts, so borrowers can filter those out.

Agent lenders confirmed that they could implement this solution without too much
system changes on their part and that this can be incorporated as part of their overall
development efforts for the daily file. The initial indication is that that development
would take about 12 weeks.

An additional question was raised by broker dealers concerning flagging of the non-cash
collateral as well. Borrowers are concerned with cases where the same principal may be
lending on both disclosed and undisclosed basis using non-cash collateral. In such a
situation, if all the collateral information comes “mixed” together on the non-cash file, it
would be difficult for brokers to separate out what portion of the non-cash
collateralshould be counted against the undisclosed loans and what portion against the
disclosed/exclusive loan. Unfortunately, the industry cannot provide any estimate at this
time as to how often such a situation may occur.

At the same time, all agents on the call confirmed that it would be very difficult and it
would take up to 1 year of development effort if they had to put a flag or make any
change to the non-cash collateral file. Because collateral is currently tracked on principal
basis regardless of the type of loans they may be involved with, trying to separate out the
disclosed/exclusive loans would be a complex process.

Based on these facts, the current decision is for brokers to monitor the non-cash collateral
on their side and look for loans where one principal may be lending on both undisclosed
and disclosed/exclusive basis and the loan is collateralized with non-cash. In these cases
the borrowers will have to separate out the information on the non-cash collateral used
for a disclosed/exclusive trade from collateral used for an undisclosed trade. Brokers
should be able to this, as they will already have information on the disclosed trades and
what amount of collateral was associated with that. Going through this process will
ensure that there is no “double counting” of collateral.

The situation with the non-cash file will be brought up to the attention of the SEC, so
they can be aware that there could be a potential problem for broker dealers, but as the
magnitude is not known at this time, it is advised that major technical solutions are not
necessary.


Annex A

To assist in the review process of the proposed solution, the following definitions have
been assembled. Please note that these are generalizations and firms may do this business
different than described.



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Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005


               Disclosed and undisclosed accounts definitions

Background:
As part of the ALD process of transmitting the Daily Loan Data Files to Borrowers, each
Lending Agent will have to indicate on individual loan records whether a loan has
already been disclosed to the Borrower (“a Disclosed Loan”) as part of its normal
communications, or whether the loan has been previously aggregated with loans from
other accounts (“a Non-Disclosed Loan”).
Definitions:
   1. Disclosed Loan: a loan for which the Borrower has received information
      associated with a single principal lender legal entity and tax identification number
      prior to receiving the ALD Daily Loan file.
   2. Non-Disclosed Loan: a loan for which the borrower has only received
      aggregated information, including data for multiple principal lenders. In this case,
      the Borrower does not already have enough information to identify the principal
      lender’s legal entity and tax identification number. Through the ALD Daily Loan
      Data Files, the Lending Agent will provide additional detailed information and
      indicate that the Borrower had not previously received this detail.


Examples:
   1. Exclusive Loans: In most cases where a Borrower and Principal Lender have
      entered into an exclusive lending arrangement, the Borrower will have enough
      information about the Principal Lender at the time loan is initiated to treat the loan
      as a “Disclosed Loan” as described above.
   2. “Auto-Borrow” Transactions: In many cases, where an agent lender provides a
      borrower with access to a pool of securities which are available in this structure,
      the Borrower will not have detailed information about the identity of the Principal
      Lender at the time of the trade and would treat the loans as “Non-Disclosed
      Loans” as defined above.
   3. “Bulk Deliveries”: In certain cases, the custodian may aggregate securities from
      several Principal Lender accounts and make a single delivery without identifying
      the specific individual Principals. Without being able to link pieces of the bulk
      delivery to individual legal entities and tax identification numbers, the Borrower
      would have to consider these Non-Disclosed Loans and would need more detailed
      information from the ALD Daily Loan File.




                                                                                         15
  Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005




  Credit Working Group Meeting Summary 3/17/05
  Participants:
1.    Rosemarie, O'Connor, Bank of America Securities   19.   Henry Steuart, JP Morgan
2.    Rick Adler, CSFB                                  20.   Bill O’Meara, Northern Trust
3.    Mariana Kind, Capco                               21.   Maryjo Graffeo, Morgan Stanley
4.    Brad Smith, Capco                                 22.   Stephanie Hahn, Morgan Stanley
5.    Leann Auer, BGI                                   23.   Dennis Halliwell, Morgan Stanley
6.    Vivian Slocombe, Barclays Capital                 24.   Sandra Vilca, Morgan Stanley
7.    Ed Berliner, Bank Of America                      25.   Jessica McDermott, State Street
8.    Nicole Bramwell, Goldman Sachs                    26.   John Grimaldi, SunGard
9.    Anita Siu, Goldman Sachs                          27.   Larry Stoia, Sumitomo Trust Banking
10.   Vaughn Campos, Lehman Brothers                    28.   Regula Wetli, Sumitomo Trust
11.   Lou Caraccio, CIBC World Markets                  29.   Don Bart, Swiss American Securities
12.   Ken Delecki, US Bank Corp                         30.   Brian MacWilliams, TBMA
13.   Barry Fay, Swiss American Securties               31.   Arthur Laichtman, UBS
14.   David Gessen, Amaranth                            32.   Linda Kim, UBS
15.   Andrea Walker, Citigroup                          33.   Brad Clark, Wachovia
16.   Myra Miller, Citigroup
17.   Tony Angelico, ING
18.   Mary O'Neill, JP Morgan Chase


  Topics covered:

      1. Address fields in incremental file (posed by John Giardina)
  The current address fields accommodate both US and foreign address formats. In the
  cases where no mail code or state/province is applicable for a foreign address, “N/A”
  could be put in the field.

      2. Local Legal ID for foreign entities/AML requirements issue
  Broker dealers feel that adding an extra field in the incremental file for a local
  government issued ID for foreign principals will create a large amount of extra work for
  them. They feel it will also cause a redundancy process, since the agent lenders should
  have also already conducted AML related due diligence based on the same criteria. For
  borrowers, having to check this additional element, will significantly slow down the
  approval process based on the amount of additional manual work they will be required to
  perform. They would prefer to receive reliance letters from agent lenders which will
  contain language to the effect that agent lenders have already performed AML/CIP
  required checks. Borrowers feel that would be sufficient to fulfill their own AML
  requirements.
  There were several lenders on the call who felt that they could provide reliance letters.

  There had been a meeting of AML experts on Monday 3/14. While there was no
  consensus from that group on a recommendation of how borrowers can best satisfy their
  AML requirements, the group had leaned toward asking for an additional field to be


                                                                                              16
Agency Lending Disclosure Taskforce – Credit Working Group Notes from 2005


added to the incremental add/delete file for local gov’t ID. The AML expert group felt
that with this additional field USA Patriot Act AML requirements will be satisfied.

The credit group reviewed that decision, and felt that this was not satisfactory from credit
perspective for the above mentioned reasons.

The credit group concluded that everyone should consult with their own firm’s AML
experts as to better understand the legal requirements.

Perhaps there will be a need to hold a joint credit – legal/AML experts call so that both
sides can face each other’s concerns and come to the best resolution.

Meanwhile, the vendors raised the point that any changes in the file layout will result in
additional work on their part, as they have already programmed the systems with current
layouts, this will consequently affect testing and implementation schedules and push back
project roll-out.

   3. What is the impact on margin?
The additional credit information should not impact front end systems for margin. The
process there should remain the same.

    4. How will industry changes impact securities lending transaction that some
       borrowers currently have with regulated investment advisors?
Files will from agent lenders, regardless of where the assets are custodies. So, if an
investment advisor is acting as an agent lender, the files will come from them directly and
not from the bank where the funds are custodied.

  The next Credit Group call is scheduled for March 31 at 1:00. This may have to
change due to a meeting of taskforce members with the SEC. An announcement will
        be sent out prior to the meeting if any changes become necessary.




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