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Risky Risk control

Author

Listed:
  • Matthias Brendel
  • Jakob Eberl
  • Christopher Weber

Abstract

The quantitative and qualitative extension of eligible collateral by the Eurosystem since the beginning of the financial crisis was the basis for a strongly extensive liquidity supply to the financial markets via the Eurosystem. Control over the risks associated with this supply of liquidity has gained growing importance in recent years as a result. Matthias Brendel, financial journalist, Jakob Eberl and Christopher Weber, Center for Economic Studies at the University of Munich, discuss how the risks can be countered via the definition of eligible collateral and establishing valuation haircuts by citing their implementation in the Eurosystem. The risk control measures defined by the European Central Bank leave leeway in the assessment of bonds that lead to a weakening of risk controls and can be the cause of fresh risks. This article offers five recommendations for effective risk minimisation based on an analysis of the risk control framework and taking into account its central implementation in the Eurosystem.

Suggested Citation

  • Matthias Brendel & Jakob Eberl & Christopher Weber, 2015. "Risky Risk control," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(14), pages 41-49, July.
    • Handle: RePEc:ces:ifosdt:v:68:y:2015:i:14:p:41-49
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    References listed on IDEAS

    as
    1. Sinn, Hans-Werner, . "The New Systems Competition: YRJÖ Jahnsson Lectures," Monographs in Economics, University of Munich, Department of Economics, number 19614, November.
    2. Sinn, Hans-Werner, 2017. "The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs," OUP Catalogue, Oxford University Press, number 9780198791447.
    3. Mr. Manmohan Singh, 2013. "The Changing Collateral Space," IMF Working Papers 2013/025, International Monetary Fund.
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    Cited by:

    1. Bindseil, Ulrich & Corsi, Marco & Sahel, Benjamin & Visser, Ad, 2017. "The Eurosystem collateral framework explained," Occasional Paper Series 189, European Central Bank.
    2. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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