Stock Lending Agreement Template for Switzerland

A Stock Lending Agreement is a specialized financial contract that allows you to temporarily transfer securities to another party while retaining economic ownership. In Switzerland, this document enables financial institutions to optimize their securities portfolios, generate additional revenue, and support market liquidity while ensuring compliance with strict Swiss regulatory requirements.

When do you need this document?

You need a Stock Lending Agreement when operating as a securities lender seeking to generate additional income from your holdings, or as a borrower requiring securities to cover short positions, facilitate settlement, or support market-making activities. Investment managers use these agreements to enhance portfolio returns, while broker-dealers rely on them to manage inventory and provide liquidity to clients. Banks and custodians enter these arrangements to optimize their securities holdings and support client trading needs. The agreement is particularly crucial when you need to establish ongoing securities lending relationships with multiple counterparties, as it provides a master framework for individual transactions.

Key legal considerations

Your Stock Lending Agreement must address critical risk management provisions, including comprehensive collateral requirements that typically exceed the value of borrowed securities. The document should specify acceptable collateral types, margin maintenance requirements, and daily marking-to-market procedures. You must include detailed provisions for corporate actions, ensuring that economic benefits flow appropriately between parties during the lending period. Default and termination clauses are essential, establishing clear procedures for early termination, forced buy-ins, and collateral liquidation. The agreement should address voting rights, dividend payments, and other corporate entitlements, ensuring proper handling of these benefits during the lending period. Manufacturing payments provisions ensure you receive equivalent economic treatment for distributions on lent securities.

Legal requirements in Switzerland

Swiss law requires your Stock Lending Agreement to comply with the Federal Act on Financial Market Infrastructures and Market Conduct (FMIA), which governs securities lending operations and establishes reporting obligations to Swiss authorities. The Swiss Federal Code of Obligations provides the underlying contract law framework, requiring clear terms regarding performance, breach, and remedies. If you are a bank, the Federal Act on Banks and Savings Banks imposes additional risk management requirements and collateral handling standards. FINMA regulations mandate specific operational requirements, including adequate systems and controls for managing securities lending risks. Your agreement must incorporate proper legal opinions confirming the enforceability of security interests in collateral and the validity of close-out netting provisions under Swiss law. Swiss regulatory reporting requirements mandate timely submission of securities lending transaction data to relevant authorities, and your agreement should establish clear responsibilities for compliance with these obligations.