Shadow Banking - Minimum Haircuts on Collateral

15-07-2013

The Financial Stability Board proposes to dampen the pro-cyclicality that may be caused by changes in haircuts in repo and securities lending during a crisis, by introducing minimum standards for the calculation of haircuts, in order to stabilise them across the cycle. They are also considering putting a floor under calculations, at least on risky assets that exhibit pro-cyclicality. Higher haircuts would also help curtail the build-up of excessive leverage.

The Financial Stability Board proposes to dampen the pro-cyclicality that may be caused by changes in haircuts in repo and securities lending during a crisis, by introducing minimum standards for the calculation of haircuts, in order to stabilise them across the cycle. They are also considering putting a floor under calculations, at least on risky assets that exhibit pro-cyclicality. Higher haircuts would also help curtail the build-up of excessive leverage.

Externe Autor

Richard COMOTTO (ICMA Centre, Henley Business School, University of Reading, the UK)