November 26 2025

How Custody Assets Can Earn More: Turning Idle Holdings into Income

In the world of asset servicing, Custody means far more than just safekeeping. With global Assets under Custody (AuC) soaring past $100 trillion, the fundamental question for institutional investors is: Are those custody assets truly working for you?

The Core Role of the Custodian

Modern custodian services go beyond protection — they power the engine of global asset servicing. The Custodian Bank acts as the trusted fiduciary, providing core services that ensure the security and administration of an investor’s assets (pension funds, asset managers, insurers).

• Safeguard: Holding securities safely and securely.
• Administration: Handling trade settlements, corporate actions, and income collection.
• Compliance: Ensuring regulatory adherence across jurisdictions.

The Opportunity: Securities Lending & Borrowing (SLB) Synergy

Securities Lending & Borrowing (SLB) becomes a critical function, transforming the custodian’s core service into a powerful revenue driver. It’s the strategic use of static, high-quality, idle custody assets to generate liquidity, transforming custodian services into a profitable arm of asset servicing. 

The Numbers that matter

• Market Revenue: The global securities lending industry generated $9.64 billion for lenders in 2024.
• The Asset Pool: Of the $100T+ in global assets under custody, an estimated $35 trillion in assets are enrolled in lending programs (the “lendable” pool).
• The Gain: Long-term investors earn a significant, low-risk revenue stream that directly enhances portfolio performance without selling their holdings.

By unlocking the massive, idle value in client assets it requires a modern Custodian strategy powered by sophisticated technology. eMACH.ai Custody is that strategic platform, enabling the essential Securities Lending & Borrowing (SLB) synergy and positioning you to offer a high-value, profitable service.

How does this custodian + SLB synergy work?

• Lenders: Long-term investors permit their custodian to temporarily lend out their securities to other market participants. They earn a lending fee (e.g., 0.5% per year) while the Custodian holds collateral (often cash, worth 102%+ of the shares’ value) for protection.
• Borrowers: Hedge funds and market makers borrow these assets for short-term trading strategies (like short-selling) or to cover settlement needs, providing the fee income.

The custodian is the Linchpin, managing the facilitation, counterparty risk management, collateral, and compliance.

The Enabler: Intellect’s eMACH.ai Custody Solution

For custodians to capture this revenue opportunity efficiently and safely, they need a modern, high-performance technology platform. They cannot rely on manual processes or fragmented systems to manage billions in daily collateral and risk.

Intellect’s eMACH.ai Custody platform is the critical technology that empowers our custodian clients to offer and scale their profitable SLB service.

Key eMACH.ai Capability Highlights

Automated Counterparty Risk Scoring & Mark-to-Market (MTM): Daily, real-time collateral valuation and exposure management.

Straight-Through Processing (STP):  Automation of the trade cycle, from asset eligibility to settlement, corporate action adjustments, and reporting.

Integrated Platform: A single, unified view of custody, collateral, and lending operations.

Benefits for the Custodian

Guaranteed Protection: Offers guaranteed counterparty risk management and ensures regulatory compliance without manual intervention.
Efficiency & Cost Reduction: Manages a higher volume of value with fewer operational resources, lowering the cost-to-serve.
Maximized Returns: Ensures the custodian and its clients realize the highest possible lending fee (“spread”) on every eligible asset.
Client Trust: Provides the clear, auditable reporting that institutional investors demand.

The eMACH.ai Custody Advantage: Enabling Profitable SLB

The Opportunity: ABC Pension Fund holds 1 million shares of TechCorp, worth $100 million. This massive pool of custody assets sits idle in the hands of XYZ Custodian Bank. Separately, Alpha Hedge Fund needs to borrow these exact shares for a short-selling strategy.

The Traditional Challenge: Orchestrating this Securities Lending & Borrowing (SLB) synergy—managing the collateral, fees, and regulatory compliance—is complex, costly, and error-prone on legacy systems.

The eMACH.ai Solution in Action

1. Permissioning & Inventory Activation:

• XYZ Custodian uses the eMACH.ai Custody platform to digitally secure permission from ABC Pension Fund to make their TechCorp shares available for lending. The system immediately tags these assets as “lendable inventory.”

2 .Automated Matchmaking & Execution:

• When ABC Pension Fund submits a Lend request, eMACH.ai’s engine instantly checks the available position that can be lent. In case of availability the request is executed in real-time on the platform.

3. Dynamic Collateral Management:

• eMACH.ai automatically calculates the required collateral ($102 million, 102% of the share value) and manages its receipt and secure holding. Our microservices architecture ensures continuous, real-time margining and mark-to-market updates, eliminating collateral risk for XYZ Custodian.

4. Fee Calculation & Revenue Generation:

• The platform’s sophisticated fee engine ensures ABC Pension Fund receives their lending fee (e.g., 0.5% per annum) instantly and accurately, while simultaneously logging XYZ Custodian’s profitable service fee. eMACH.ai turns a static asset holding into a predictable revenue stream for the Custodian.

5. Seamless Settlement and Return:

• When Alpha Hedge Fund closes the loan, eMACH.ai automates the return of the TechCorp shares and the release of the collateral, ensuring fast, compliant, and error-free settlement for all parties.

The Outcome for XYZ Custodian: By leveraging the eMACH.ai Custody solution, XYZ Custodian doesn’t just safely hold assets; they transform them into an active profit center, offering a high-value, digitally-enabled SLB service that attracts and retains large clients like ABC Pension Fund.

Who benefits? Everyone

• Lender (ABC Pension Fund): Earns extra income with minimal risk.
• Borrower (Alpha Hedge Fund): Gets the securities it needs for trading.
• Custodian (XYZ Bank): Earns fees, strengthens client relationships, and grows its custodian services offering.
  

Real-World Impact: Unlocking Substantial Value

This is not just about a few basis points. It is a substantial, proven income stream. For example, the California State Teachers’ Retirement System (CalSTRS) earned $88.8 million in a single year from its securities lending program alone.

The Custodian’s Gain (The Revenue Takeaway):

• New Revenue: Earns service fees on billions in lent assets.
• Strengthened Mandate: Solidifies the relationship with clients by turning custody into a profit center for them.
• Operational Excellence: Achieves global scale through advanced asset servicing technology, managing trillions safely and cost-effectively.

In short

Custody + Intellect’s eMACH.ai + Securities Lending =
🔹 Safe Storage
🔹 Automated Counterparty Risk Management
🔹 Maximised Client Returns, i.e Smart use of idle assets to earn extra returns (lending)

Smart use of custody assets turns idle holdings into earnings. Don’t just run a custody business — run a custody platform that enables profitable global asset servicing. Let’s talk about how eMACH.ai Custody can help you deliver this essential, revenue-generating service.

Additional Resources on the mechanics and benefits of securities lending:

• CalSTRS 2024 Ancillary Investment Report: (See page 6 for the $88.8M lending breakdown) https://www.calstrs.com/files/f6258f15d/AncillaryInvestmentProgramAnnualReport2024.pdf
• State Street White Paper: “The ‘Sharpe’ point of securities lending” (An excellent analysis of the risk/return profile) https://www.statestreet.com/sa/en/insights/evaluating-diversification-and-performance-of-securities-lending
• ISLA Market Report (H2 2024/2025): (For a deep dive into industry trends) https://www.islaemea.org/securities-lending-market-data/

Author:

Harshil Mehta
Senior Project Manager