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Euro repo market functioning: collateral is king

Author

Listed:
  • Patrick Schaffner
  • Angelo Ranaldo
  • Kostas Tsatsaronis

Abstract

Repo markets play a major role in redistributing liquidity and collateral between financial institutions. A unique transaction-level database reveals how the euro-denominated repo market has performed since the mid-2000s. We find that the market recovered strongly from periods of intense stress, even though it remains segmented according to the home country of the collateral used. In recent years, signs of segmentation have increased as the main motivation of repo market participants has shifted from funding to the trading of collateral.

Suggested Citation

  • Patrick Schaffner & Angelo Ranaldo & Kostas Tsatsaronis, 2019. "Euro repo market functioning: collateral is king," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:1912k
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    References listed on IDEAS

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    5. Brand, Claus & Ferrante, Lorenzo & Hubert, Antoine, 2019. "From cash- to securities-driven euro area repo markets: the role of financial stress and safe asset scarcity," Working Paper Series 2232, European Central Bank.
    6. Benjamin Munyan, 2015. "Regulatory Arbitrage in the Repo Market," Working Papers 15-22, Office of Financial Research, US Department of the Treasury.
    7. Duffie, Darrell, 1996. "Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June.
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    Citations

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    Cited by:

    1. Carlos Cañón & Jorge Florez-Acosta & Karoll Gómez, 2023. "The effects of two-way lending between financial conglomerates in bilateral repo markets," Borradores de Economia 1246, Banco de la Republica de Colombia.
    2. Fegatelli, Paolo, 2022. "A central bank digital currency in a heterogeneous monetary union: Managing the effects on the bank lending channel," Journal of Macroeconomics, Elsevier, vol. 71(C).
    3. Bassi, Claudio & Grill, Michael & Mirza, Harun & O’Donnell, Charles & Wedow, Michael & Hermes, Felix, 2024. "Enhancing repo market transparency: the EU Securities Financing Transactions Regulation," Occasional Paper Series 342, European Central Bank.
    4. Baltzer, Markus & Schlepper, Kathi & Speck, Christian, 2022. "The Eurosystem's asset purchase programmes, securities lending and Bund specialness," Discussion Papers 39/2022, Deutsche Bundesbank.
    5. Eisenschmidt, Jens & Ma, Yiming & Zhang, Anthony Lee, 2022. "Monetary policy transmission in segmented markets," Working Paper Series 2706, European Central Bank.
    6. Mario Di Filippo & Angelo Ranaldo & Jan Wrampelmeyer, 2022. "Unsecured and Secured Funding," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(2-3), pages 651-662, March.
    7. Ranaldo, Angelo & Schaffner, Patrick & Vasios, Michalis, 2021. "Regulatory effects on short-term interest rates," Journal of Financial Economics, Elsevier, vol. 141(2), pages 750-770.
    8. Angelo Ranaldo & Benedikt Ballensiefen & Hannah Winterberg, 2020. "Monetary policy disconnect," Working Papers on Finance 2003, University of St. Gallen, School of Finance.
    9. Yao, Dongmin & Sun, Rong & Gao, Qiunan, 2022. "The network structure of the China bond market: Characteristics and explanations from trading factors," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 598(C).
    10. Rossi Arthur & Lecomte Ernest & Legrand Théophile & Nguyen Benoît, 2023. "French sovereign debt liquidity: main factors, recent developments and resilience during the Covid crisis [Déterminants, évolutions de la liquidité de la dette souveraine française et résilience au," Bulletin de la Banque de France, Banque de France, issue 246.
    11. Tomás Carrera de Souza & Tom Hudepohl, 2022. "The Eurosystem’s bond market share at an all-time high: what does it mean for repo markets?," Working Papers 745, DNB.

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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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