The Employee Benefits Security Administration expanded an ERISA class exemption to enhance the ability of pension funds to lend securities to some overseas banks and broker-dealers, the Labor Department unit announced today. The new pool of prospective borrowers now includes broker-dealers and banks in the United Kingdom, Canada, France, Germany, Japan, Australia, Switzerland, the Netherlands and Sweden, according to Gloria Della, a department spokeswoman. Previously, the class exemption allowed securities lending to U.S.-based broker-dealers only.
If the pension plan's U.S.-based lending agent agrees to indemnify the plan against losses resulting from a default, the expanded exemption also allows the pension plan to accept any collateral currently permitted by relevant SEC regulations, the news release said.
The exemption expansion was originally requested by the American Bankers Association and the Risk Management Association, according to Ms. Della. An ABA spokeswoman said the banking association requested the relief in the 1980s.
Andrew Oringer, an ERISA attorney at Clifford Chance US LLP, said an exemption in the recently approved Pension Protection Act of 2006 would also clear the way for similar transactions in certain cases. "There's no doubt that the expansion of the specific exemption will be a helpful and welcome step," Mr. Oringer said.