FCIC - AIG - Securities Lending

  • 2008 0902 - FCIC - FRB (Danielle Vicente) - AIG Liquidity and Access to the PDCF - 4p
    • Liability runs: not just a banking problem
    1. AIG is an active securities lender; the firm takes a large portion of its securities and lends them to institutions and investors who pledge collateral against these securities. AIG then takes the collateral and invests it in assets with longer durations in order to earn a spread. This is possible because the liabilities due to the investors are normally rolled over. Currently, AIG's assets associated with securities lending are experiencing losses, and are valued at $59.5, less than the $75.1 billion in liabilities.
    2. Potential liquidity need:
      • Securities lending contracts range in maturity from one day to six months. Given the current operating environment, roll over risk is substantial, and could mirror a run on deposits. Therefore, AIG's potential overnight liquidity needs for securities lending varies, but is limited to $75 billion.
  • 2008 0913 - FCIC - FRB (Brian Peters/NY/FRS) -FRBNYAIG00510 - 2p
    • Outside of the holding co., the insurance subs have about $68B in securities lending liabilities to the 12 largest firms.
    • Program is managed by the holding company (AIG Financial Products).