The prevailing global financial system suffers from a shortage of good collateral for increased reliance on nonbank secured lending. Given that the global financial crisis was mainly triggered by the collapse of the c...The prevailing global financial system suffers from a shortage of good collateral for increased reliance on nonbank secured lending. Given that the global financial crisis was mainly triggered by the collapse of the collateral pool for dealer-based credit intermediation, this issue needs to be resolved quickly for normalized credit supply. Primarily, increased supply capacity for safe assets that can serve as valid collateral is the key agenda. This would be possible with a better use of USTs that are kept in EME silos and a broader recognition of an emerging market sovereign collateral pool. The inclusion of new collateral into the expanded and invigorated repo system that includes Asia would stabilize global capital flows and improve financial stability. In a related context, a market-driven, risk-mitigating regional repo market initiative would also bring balance to an increasingly market-driven financial ecosystem and mitigate the global shortage of safe assets.展开更多
文摘The prevailing global financial system suffers from a shortage of good collateral for increased reliance on nonbank secured lending. Given that the global financial crisis was mainly triggered by the collapse of the collateral pool for dealer-based credit intermediation, this issue needs to be resolved quickly for normalized credit supply. Primarily, increased supply capacity for safe assets that can serve as valid collateral is the key agenda. This would be possible with a better use of USTs that are kept in EME silos and a broader recognition of an emerging market sovereign collateral pool. The inclusion of new collateral into the expanded and invigorated repo system that includes Asia would stabilize global capital flows and improve financial stability. In a related context, a market-driven, risk-mitigating regional repo market initiative would also bring balance to an increasingly market-driven financial ecosystem and mitigate the global shortage of safe assets.
