The National Pension Commission (PenCom) has released a new framework to guide Pension Fund Administrators (PFAs) on their participation in securities lending and repurchase transactions (repos).
Securities lending involves the temporary transfer of securities from a lender to a borrower, usually in exchange for a fee or collateral. Repos, on the other hand, are sales of securities with an agreement to repurchase them at a specified price on a specified date.
According to a circular issued by A. M. Saleem, Director of the Surveillance Department at PenCom, PFAs are now required to report detailed disclosures of their securities lending and repo activities.
For quarterly reports to PenCom, PFAs must include:
- The value of securities on loan, broken down by asset class.
- A list of counterparties and exposures.
- The composition and valuation of collateral.
- Income earned and fees paid.
For annual reports to Retirement Savings Account (RSA) holders, PFAs are to disclose:
- Securities lending and repo activities.
- Revenue earned.
- Agent arrangements.
In addition, Saleem emphasized that securities lending and repo positions must be clearly disclosed in the notes to the financial statements of the pension funds.
The new framework is designed to promote transparency, improve risk management, and enhance returns on pension fund assets while safeguarding contributors’ investments.
