A group of specialist banks are profiting from Europe’s financial crisis, thanks to a surge in demand for securities which allow traders to bet against bank stocks and government bonds.

The so-called custody banks that administer securities, a normally unglamorous and low-margin business, include BNY Mellon, JP Morgan and State Street .The banks, as well as loan specialist Equilend, take a fee for linking lenders with surplus stock—typically pension funds—with borrowers such as hedge funds and banks, who want to position themselves in markets by short-selling.

Pension funds and insurers have become increasingly attracted to lending by the fees they accrue from the borrowers at a time when equity returns are off.The latter want stocks or bonds to sell them in the hope that their price will fall over time.

The Daily Independent/Bangladesh/ 11th Jan 2012