The American International Group has announced that certain of its domestic life insurance subsidiaries have entered into a securities lending agreement with the Federal Reserve Bank of New York.
Under the securities lending agreement, the Federal Reserve Bank of New York (New York Fed) will borrow, on an overnight basis, investment-grade fixed income securities from these American International Group (AIG) subsidiaries in return for cash collateral.
As expected, drawdowns under the existing New York Fed credit facility have been used, in part, to settle securities lending transactions. AIG said that it understands that the New York Fed is prepared to borrow securities to extend AIG’s currently outstanding lending obligations where those obligations are not rolled over or replaced by transactions with other private market participants.
These borrowings by the New York Fed will allow AIG to replenish liquidity to the securities lending program on an as-needed basis, while providing possession and control of these third-party securities to the New York Fed.