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Collateral Reuse and Balance Sheet Space

Author: Mr.Manmohan Singh

Publisher: International Monetary Fund

Published: 2017-05-08

Total Pages: 29

ISBN-13: 147559934X

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Transactions on wholesale capital markets are often secured by marketable collateral. However, collateral needs balance sheet space to move within the financial system. Certain new regulations that constrain private sector bank balance sheets may have the effect of impeding collateral flows. This may have important consequences for monetary policy transmission, for short term money market functioning, and for market liquidity. In this context (and in contrast to the literature, which has focused mainly on the repo market), this paper analyzes securities-lending, derivatives, and prime-brokerage markets as suppliers of collateral. It highlights the incentives created by new regulations for different suppliers of collateral. Moreover, it argues that the central banks should be mindful of the effect of their actions on the ability of markets to intermediate collateral.

Book Synopsis Collateral Reuse and Balance Sheet Space by : Mr.Manmohan Singh

Download or read book Collateral Reuse and Balance Sheet Space written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2017-05-08 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Transactions on wholesale capital markets are often secured by marketable collateral. However, collateral needs balance sheet space to move within the financial system. Certain new regulations that constrain private sector bank balance sheets may have the effect of impeding collateral flows. This may have important consequences for monetary policy transmission, for short term money market functioning, and for market liquidity. In this context (and in contrast to the literature, which has focused mainly on the repo market), this paper analyzes securities-lending, derivatives, and prime-brokerage markets as suppliers of collateral. It highlights the incentives created by new regulations for different suppliers of collateral. Moreover, it argues that the central banks should be mindful of the effect of their actions on the ability of markets to intermediate collateral.

Pledged Collateral Market's Role in Transmission to Short-Term Market Rates

Author: Mr.Manmohan Singh

Publisher: International Monetary Fund

Published: 2019-05-17

Total Pages: 21

ISBN-13: 1498312799

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In global financial centers, short-term market rates are effectively determined in the pledged collateral market, where banks and other financial institutions exchange collateral (such as bonds and equities) for money. Furthermore, the use of long-dated securities as collateral for short tenors—or example, in securities-lending and repo markets, and prime brokerage funding—impacts the risk premia (or moneyness) along the yield curve. In this paper, we deploy a methodology to show that transactions using long dated collateral also affect short-term market rates. Our results suggest that the unwind of central bank balance sheets will likely strengthen the monetary policy transmission, as dealer balance-sheet space is now relatively less constrained, with a rebound in collateral reuse.

Book Synopsis Pledged Collateral Market's Role in Transmission to Short-Term Market Rates by : Mr.Manmohan Singh

Download or read book Pledged Collateral Market's Role in Transmission to Short-Term Market Rates written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2019-05-17 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In global financial centers, short-term market rates are effectively determined in the pledged collateral market, where banks and other financial institutions exchange collateral (such as bonds and equities) for money. Furthermore, the use of long-dated securities as collateral for short tenors—or example, in securities-lending and repo markets, and prime brokerage funding—impacts the risk premia (or moneyness) along the yield curve. In this paper, we deploy a methodology to show that transactions using long dated collateral also affect short-term market rates. Our results suggest that the unwind of central bank balance sheets will likely strengthen the monetary policy transmission, as dealer balance-sheet space is now relatively less constrained, with a rebound in collateral reuse.

Velocity of Pledged Collateral

Author: Mr.Manmohan Singh

Publisher: International Monetary Fund

Published: 2011-11-01

Total Pages: 26

ISBN-13: 1463923953

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Large banks and dealers use and reuse collateral pledged by nonbanks, which helps lubricate the global financial system. The supply of collateral arises from specific investment strategies in the asset management complex, with the primary providers being hedge funds, pension funds, insurers, official sector accounts, money markets and others. Post-Lehman, there has been a significant decline in the source collateral for the large dealers that specialize in intermediating pledgeable collateral. Since collateral can be reused, the overall effect (i.e., reduced ?source' of collateral times the velocity of collateral) may have been a $4-5 trillion reduction in collateral. This decline in financial lubrication likely has impact on the conduct of global monetary policy. And recent regulations aimed at financial stability, focusing on building equity and reducing leverage at large banks/dealers, may also reduce financial lubrication in the nonbank/bank nexus.

Book Synopsis Velocity of Pledged Collateral by : Mr.Manmohan Singh

Download or read book Velocity of Pledged Collateral written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2011-11-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Large banks and dealers use and reuse collateral pledged by nonbanks, which helps lubricate the global financial system. The supply of collateral arises from specific investment strategies in the asset management complex, with the primary providers being hedge funds, pension funds, insurers, official sector accounts, money markets and others. Post-Lehman, there has been a significant decline in the source collateral for the large dealers that specialize in intermediating pledgeable collateral. Since collateral can be reused, the overall effect (i.e., reduced ?source' of collateral times the velocity of collateral) may have been a $4-5 trillion reduction in collateral. This decline in financial lubrication likely has impact on the conduct of global monetary policy. And recent regulations aimed at financial stability, focusing on building equity and reducing leverage at large banks/dealers, may also reduce financial lubrication in the nonbank/bank nexus.

Financial Plumbing and Monetary Policy

Author: Mr.Manmohan Singh

Publisher: International Monetary Fund

Published: 2014-06-20

Total Pages: 18

ISBN-13: 1498330614

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This paper focuses on how changes in financial plumbing of the markets may impact the monetary policy options as central banks contemplate lift off from zero lower bound (ZLB). Under the proposed regulations, banks will face leverage ratio constraints. As a result of quantitative easing (QE), banks want balance sheet “space” for financial intermediation/ non-depository activities. At the same time, regulatory changes are boosting demand for high quality liquid assets. The paper also discusses the role of repo markets and the importance of collateral velocity and the need to avoid wedges between repo and monetary policy rates when leaving ZLB.

Book Synopsis Financial Plumbing and Monetary Policy by : Mr.Manmohan Singh

Download or read book Financial Plumbing and Monetary Policy written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2014-06-20 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on how changes in financial plumbing of the markets may impact the monetary policy options as central banks contemplate lift off from zero lower bound (ZLB). Under the proposed regulations, banks will face leverage ratio constraints. As a result of quantitative easing (QE), banks want balance sheet “space” for financial intermediation/ non-depository activities. At the same time, regulatory changes are boosting demand for high quality liquid assets. The paper also discusses the role of repo markets and the importance of collateral velocity and the need to avoid wedges between repo and monetary policy rates when leaving ZLB.

Leverage—A Broader View

Author: Mr.Manmohan Singh

Publisher: International Monetary Fund

Published: 2018-03-19

Total Pages: 28

ISBN-13: 1484348303

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Traditional measures of leverage in the financial system tend to reflect bank balance sheet data. The paper argues that these traditional, bank-centric measures should be augmented by considering pledged collateral in the financial system since pledged collateral provides a measure of an important part of nonbank funding to banks. From a policy perspective, the paper suggests that a broader view on leverage will enhance our understanding of global systemic risk, and complement the theoretical work in this field by providing a link from micro-level leverage data to macro aggregates such as credit to the economy.

Book Synopsis Leverage—A Broader View by : Mr.Manmohan Singh

Download or read book Leverage—A Broader View written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2018-03-19 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional measures of leverage in the financial system tend to reflect bank balance sheet data. The paper argues that these traditional, bank-centric measures should be augmented by considering pledged collateral in the financial system since pledged collateral provides a measure of an important part of nonbank funding to banks. From a policy perspective, the paper suggests that a broader view on leverage will enhance our understanding of global systemic risk, and complement the theoretical work in this field by providing a link from micro-level leverage data to macro aggregates such as credit to the economy.

Central Counterparties Resolution—An Unresolved Problem

Author: Mr.Manmohan Singh

Publisher: International Monetary Fund

Published: 2018-03-20

Total Pages: 23

ISBN-13: 1484347307

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Recovery and resolution regimes are being developed for central counterparties (CCPs). We analyse current resolution tools in the context of policy, which is to restore the critical functions of a failed CCP. We conclude that the toolkit is insufficient to avoid the costs of resolution being borne by taxpayers, and propose alternative policy suggestions for addressing the problem of a failed CCP.

Book Synopsis Central Counterparties Resolution—An Unresolved Problem by : Mr.Manmohan Singh

Download or read book Central Counterparties Resolution—An Unresolved Problem written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2018-03-20 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recovery and resolution regimes are being developed for central counterparties (CCPs). We analyse current resolution tools in the context of policy, which is to restore the critical functions of a failed CCP. We conclude that the toolkit is insufficient to avoid the costs of resolution being borne by taxpayers, and propose alternative policy suggestions for addressing the problem of a failed CCP.

Global Financial Stability Report, April 2012

Author: International Monetary Fund. Monetary and Capital Markets Department

Publisher: International Monetary Fund

Published: 2012-04-18

Total Pages: 94

ISBN-13: 1616352477

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The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.

Book Synopsis Global Financial Stability Report, April 2012 by : International Monetary Fund. Monetary and Capital Markets Department

Download or read book Global Financial Stability Report, April 2012 written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2012-04-18 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.

Shadow Banking and Market-Based Finance

Author: Tobias Adrian

Publisher: International Monetary Fund

Published: 2018-08-01

Total Pages: 47

ISBN-13: 1484343883

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Variants of nonbank credit intermediation differ greatly. We provide a conceptual framework to help distinguish various characteristics—structural features, economic motivations, and risk implications—associated with different forms of nonbank credit intermediation. Anchored by this framework, we take stock of the evolution of shadow banking and the extent of its transformation into market-based finance since the global financial crisis. In light of the substantial regulatory and supervisory responses of recent years, we highlight key areas of progress while drawing attention to elements where work still needs to be done. Case studies of policy challenges arising in different jurisdictions are also discussed. While many of the amplification forces that were at play during the global financial crisis have diminished, the post-crisis reform agenda is not yet complete, and policy makers must remain attentive to new challenges looming on the horizon.

Book Synopsis Shadow Banking and Market-Based Finance by : Tobias Adrian

Download or read book Shadow Banking and Market-Based Finance written by Tobias Adrian and published by International Monetary Fund. This book was released on 2018-08-01 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Variants of nonbank credit intermediation differ greatly. We provide a conceptual framework to help distinguish various characteristics—structural features, economic motivations, and risk implications—associated with different forms of nonbank credit intermediation. Anchored by this framework, we take stock of the evolution of shadow banking and the extent of its transformation into market-based finance since the global financial crisis. In light of the substantial regulatory and supervisory responses of recent years, we highlight key areas of progress while drawing attention to elements where work still needs to be done. Case studies of policy challenges arising in different jurisdictions are also discussed. While many of the amplification forces that were at play during the global financial crisis have diminished, the post-crisis reform agenda is not yet complete, and policy makers must remain attentive to new challenges looming on the horizon.

Collateral and Financial Plumbing

Author: Manmohan Singh

Publisher:

Published: 2016

Total Pages: 211

ISBN-13:

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Collateral is one of the building blocks on which the financial markets are constructed. Used for a number of purposes--including trading with central counterparties (CCPs), secured funding with market counterparties and central banks, OTC derivatives margining and settlement--the role of effective collateral management in monetizing assets has never been more important.

Book Synopsis Collateral and Financial Plumbing by : Manmohan Singh

Download or read book Collateral and Financial Plumbing written by Manmohan Singh and published by . This book was released on 2016 with total page 211 pages. Available in PDF, EPUB and Kindle. Book excerpt: Collateral is one of the building blocks on which the financial markets are constructed. Used for a number of purposes--including trading with central counterparties (CCPs), secured funding with market counterparties and central banks, OTC derivatives margining and settlement--the role of effective collateral management in monetizing assets has never been more important.

IMF Research Bulletin, Fall 2017

Author: International Monetary Fund. Research Dept.

Publisher: International Monetary Fund

Published: 2017-11-09

Total Pages: 15

ISBN-13: 1484327292

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The Fall 2017 IMF Research Bulletin includes a Q&A article covering "Seven Questions on the Globalization of Farmland" by Christian Bogmans. The first research summary, by Manmohan Singh and Haobing Wang is "Central Bank Balance Sheet Policies: Some Policy Implications." The second research summary is "Leaning Against the Windy Bank Lending" by Giovanni Melina and Stefania Villa. A listing of new IMF Working Papers and Staff Discussion Notes is featured, as well as new titles from IMF Publications. Information on IMF Economic Review is also included.

Book Synopsis IMF Research Bulletin, Fall 2017 by : International Monetary Fund. Research Dept.

Download or read book IMF Research Bulletin, Fall 2017 written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 2017-11-09 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Fall 2017 IMF Research Bulletin includes a Q&A article covering "Seven Questions on the Globalization of Farmland" by Christian Bogmans. The first research summary, by Manmohan Singh and Haobing Wang is "Central Bank Balance Sheet Policies: Some Policy Implications." The second research summary is "Leaning Against the Windy Bank Lending" by Giovanni Melina and Stefania Villa. A listing of new IMF Working Papers and Staff Discussion Notes is featured, as well as new titles from IMF Publications. Information on IMF Economic Review is also included.