Collateral Markets and Financial Plumbing (3rd Edition)
First published:
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The Collateral Custodians
The Collateral Custodians
Foreword
Introduction
Collateral in Financial Plumbing
Collateral Velocity
Leverage in the Financial System
Quantitative Easing and the IS/LM Framework
Money, Collateral and Safe Assets
“Reverse” Monetary Policy Transmission
Central Bank Balance Sheet Policies and Emerging Markets
The Collateral Custodians
The Changing Collateral Space
Collateral in the OTC Derivatives Market
CCP Resolution Remains Unresolved
The Sovereign–Bank Nexus via OTC Derivatives
Privacy Provision, Payment Latency and the Role of Collateral
Conclusion
Annex: Chapter 2
Annex: Chapter 7
This chapter will cover some of the major challenges for an efficient global financial system, including the mobilisation of eligible collateral across a fragmented global infrastructure and the role of global custodians. The chapter describes how the market has entered into a new collateral paradigm that requires a structured, cohesive approach both internally within financial institutions and externally across the global financial system. In keeping with the theme of this book, this chapter can be viewed through the lens of collateral and how the custodians will impact the plumbing in the future.
INTRODUCTION
The overall goal of the numerous regulatory initiatives is to make the global financial market more resilient against systemic risk. Since 2008, regulators have acknowledged the importance of collateral and, in some jurisdictions, have addressed its shortage. Regulations recognise that collateral lubrication is essential to financial plumbing and have chosen to use practical methodologies (eg, netting of repos under certain conditions), although the leverage ratio will still be a binding constraint. The primary driver has been the continued shift from non
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