UK - Trustees are largely unaware of the potential conflicts of interest and risk involved with securities lending, a former governor of the International Corporate Governance Network has claimed.
He said: "The securities lending activity has been largely ignored because it was sold to trustees as a risk free activity and it was kept deliberately invisible."
However, he explained events over the past year events have shown there are problems with securities lending - both related to counterparty risk and to the reinvestment of collateral.
In addition, he said there was also a risk due to the potential bankruptcy of the intermediary involved in the securities lending transaction.
He said: "In the US courts decided lent stocks are not attachable to any bankruptcy procedure, but I do not believe the same legal principles apply in the UK.
According to Clearfield, there was no evidence so far that securities lending and short selling had a significant role in the crisis.
He added: "The process is so opaque and there is potential for abuse, so it is very difficult to conclude anything at this stage."
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The Department for Work and Pensions (DWP) has said it while believes in the benefits of consolidating defined benefit (DB) schemes, there are significant issues to overcome.
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