(a) The retirement system may, in the exercise of its constitutional discretion to manage the assets of the retirement system, select one or more commercial banks, depository trust companies, or other entities to serve as custodian or custodians of the system’s securities and to lend the securities under rules adopted by the board of trustees and as required by this section.
(b) To be eligible to lend securities under this section, a bank or brokerage firm must:
(1) be experienced in the operation of a fully secured securities loan program;
(2) maintain adequate capital in the prudent judgment of the retirement system to assure the safety of the securities;
(3) execute an indemnification agreement satisfactory in form and content to the retirement system fully indemnifying the retirement system against loss resulting from borrower default in its operation of a securities loan program for the system’s securities; and
(4) require any securities broker or dealer to whom it lends securities belonging to the retirement system to deliver to and maintain with the custodian collateral in the form of cash or United States government securities in an amount equal to not less than 100 percent of the market value, from time to time, of the loaned securities.