IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this book or follow this series

Collateral in wholesale financial markets: recent trends, risk management and market dynamics

  • Bank for International Settlements
Registered author(s):

    Executive summary Purpose of study The use of collateral has become one of the most important and widespread risk mitigation techniques in wholesale financial markets. Financial institutions extensively employ collateral in lending, in securities trading and derivatives markets and in payment and settlement systems. Central banks generally require collateral in their credit operations. Over the last decade, the use of collateral in wholesale financial markets has grown rapidly. The collateral most commonly used and apparently preferred by market participants are instruments with inherently low credit and liquidity risks, namely government securities and cash. With the growth of collateral use so rapid, concern has been expressed that it could outstrip the growth of the effective supply of these preferred assets. Scarcity of collateral could increase the cost of financial transactions, slow or inhibit financial activity and potentially encourage greater reliance on more inefficient non-price rationing mechanisms, such as restricting access to markets. These developments suggest two questions for exploration. The first is to what extent trends in the use of collateral and its supply have created or have the potential to create a relative scarcity of low-risk, liquid collateral and, if such scarcity emerges, how markets could adjust. The second is how such adjustment mechanisms and other changes in collateral usage might alter market dynamics and the risk management demands on financial institutions, particularly in stress periods.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.bis.org/publ/cgfs17.pdf
    File Function: Full PDF document
    Download Restriction: no

    File URL: http://www.bis.org/publ/cgfs17.htm
    Download Restriction: no

    as
    in new window

    This book is provided by Bank for International Settlements in its series CGFS Papers with number 17 and published in 2001.
    ISBN: 92-9131-614-8
    Handle: RePEc:bis:biscgf:17
    Contact details of provider: Postal: Centralbahnplatz 2, CH - 4002 Basel
    Phone: (41) 61 - 280 80 80
    Fax: (41) 61 - 280 91 00
    Web page: http://www.bis.org/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Coco, Giuseppe, 2000. " On the Use of Collateral," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 191-214, April.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bis:biscgf:17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Beslmeisl)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.