The owner of a security can lend it to a borrower. The lender receives a fee from the borrower. The lending transaction is handled by the custodian. It is important for the lender to know the borrower’s creditworthiness. There are two ways to conduct this business:

1. The custodian bank can act as a so-called counterparty. In this case, the custodian bank is the principal and is directly liable to the lender in the event that the borrower does not return the loaned securities on time.

2. If the custodian bank acts as an intermediary, i.e. as an agent, the lender must personally ensure that the borrower returns the loaned securities in due time. The custodian bank is not liable in this case.