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The effective supply of collateral in Australia

Author

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  • Mark Jozsef Manning
  • Belinda Cheung
  • Angus Moore

Abstract

ABSTRACT High-quality assets play an important role as collateral for a wide range of transactions and activities in wholesale financial markets. Regulatory changes introduced since the global financial crisis are increasing the demand for high-quality assets, thereby raising concerns about possible shortages. Drawing on data from a survey of securities dealers' collateral activity in the Australian market in 2014 and 2016, this paper attempts to quantify the "effective" supply of collateral assets in Australia by applying a measure of supply that adjusts outstanding issuance for two important features of the collateral market. One feature is that a large proportion of Australian highquality assets are held by long-term investors that do not make these assets available for sale, loan or use in repurchase agreements. A second feature is the ability to reuse collateral assets, thereby allowing a single piece of collateral to meet multiple demands. Using this measure, the current effective supply in 2016 is estimated to be around A$123 billion, comprising around A$99 billion of active supply that is reused on average 1.25 times. This amount has remained largely unchanged since the 2014 survey, due to broadly offsetting changes in total source collateral and the rate of collateral reuse.

Suggested Citation

  • Mark Jozsef Manning & Belinda Cheung & Angus Moore, . "The effective supply of collateral in Australia," Journal of Financial Market Infrastructures, Journal of Financial Market Infrastructures.
    • Handle: RePEc:rsk:journ7:2469241
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    Cited by:

    1. is not listed on IDEAS
    2. Yuliya Baranova & Zijun Liu & Joseph Noss, 2016. "The role of collateral in supporting liquidity," Bank of England working papers 609, Bank of England.
    3. Justus Inhoffen & Iman van Lelyveld, 2023. "Safe Asset Scarcity and Re-use in the European Repo Market," Discussion Papers of DIW Berlin 2050, DIW Berlin, German Institute for Economic Research.
    4. Victor Le Coz & Nolwenn Allaire & Michael Benzaquen & Damien Challet, 2024. "Stylized facts in money markets: an empirical analysis of the eurozone data," Papers 2410.16021, arXiv.org.
    5. Le Coz, Victor & Benzaquen, Michael & Challet, Damien, 2025. "A minimal model of money creation within secured interbank markets," Journal of Economic Behavior & Organization, Elsevier, vol. 237(C).
    6. Mr. Manmohan Singh & Rohit Goel, 2019. "Pledged Collateral Market's Role in Transmission to Short-Term Market Rates," IMF Working Papers 2019/106, International Monetary Fund.
    7. Issa, George & Jarnecic, Elvis, 2024. "Collateral reuse as a direct funding mechanism in repo markets," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    8. Heath, Alexandra & Kelly, Gerard & Manning, Mark & Markose, Sheri & Shaghaghi, Ali Rais, 2016. "CCPs and network stability in OTC derivatives markets," Journal of Financial Stability, Elsevier, vol. 27(C), pages 217-233.
    9. Victor Le Coz & Michael Benzaquen & Damien Challet, 2024. "A minimal model of money creation under regulatory constraints," Papers 2410.18145, arXiv.org.
    10. Jonathan Carroll & Ashwin Clarke, 2014. "The Equity Securities Lending Market," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 31-42, December.
    11. Chris Becker & Ashley Fang & Jin Cong Wang, 2016. "Developments in the Australian Repo Market," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 41-46, September.
    12. Allaire, Nolwenn & Le Coz, Victor & Benzaquen, Michael & Challe, Damien, 2025. "Stylized facts in money markets: an empirical analysis of the eurozone data," Working Paper Series 3113, European Central Bank.

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