Legacy Thread

[basserdan]

Investors warned on risks of borrowing against stocks and bonds

Securities-based loans have boosted profits at Morgan Stanley and Bank of America



By Ben McLannahan in New York
yesterday

(Excerpted)

A Wall Street watchdog has warned of the risks of people borrowing against their investment portfolios, in a move that could crimp a money-spinning product line for the likes of Morgan Stanley and Bank of America.

On Monday the Financial Industry Regulatory Authority said it would be looking particularly closely at securities-backed lines of credit, as it set out its priorities for the year ahead. Such products, which involve customers taking out loans secured against portfolios of stocks and bonds, have grown rapidly as markets have continued their gently rising trend.

Such loans are thought to present little risk to the lender, as they are typically over-collateralised by stocks or bonds and any securities pledged can be sold without a customer’s consent to meet a margin call.

Continues below:

https://www.ft.com/content/0b83e9ca-f4c5-11e7-88f7-5465a6ce1a00