By definition, “leasing bank instruments” involves borrowing an MTN or BG for the purpose of proving temporary collateral. Once the lessee receives the bank instrument, they can prove these assets for the opportunity they have chosen. In most cases, investors attempt to use a leased bank guarantee to finance projects, attain loans, or enter in private placement investments. Though this sounds great from the pitch of a greedy broker, the reality is, investors rarely succeed
Over the last decade, bank instrument leasing has evolved from an extreme rarity to a rapidly growing industry. You may say, “Isn’t this good for both investors and brokers?” Well, bank instrument leasing can definitely be good for the brokers, but for investors, it can be the exact opposite. The reality is, when you lease bank instruments, you will NEVER have full control over the asset. Think about, if you owned a 500M note, would you let an investor put it at risk for 3% (15M). I don’t think so! Even if you get an MT 760 to your account, the leased funds are blocked. Though leased bank instruments can prove temporary collateral, you can NEVER lien, block, or assign leased funds to another person. This is the part most leased instrument providers fail to mention, leaving their pockets fatter in the midst of your failure.
Even though we have warned our readers, we know some of you will still choose to lease bank instruments. For those who pursue bank instrument leasing, please be safe and extremely cautious. There is no risk in assessing leased instrument providers, but always remember what you have learned here before making a decision. For more information on leased bank instruments, take a look at the articles in the private placement category of our blog. This will teach you the facts of leased bank instruments, and far more.