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A Case for Macroprudential Margins and Haircuts

Author

Listed:
  • Battistini, Niccolò
  • Grill, Michael
  • Marmara, Pierre
  • van der Veer, Koen

Abstract

Financial institutions can build up leverage via the use of derivatives and securities financing transactions (SFTs). In order to limit the build-up of excessive leverage and the associated liquidity risks, as well as the pro-cyclical effects of margin and haircut setting practices, the macro-prudential toolkit needs to be extended. This special feature presents the general case for setting macro-prudential margins and haircuts using theoretical and empirical evidence on the effectiveness of various design options. Furthermore, it addresses implementation and governance issues that warrant attention when developing a macro-prudential framework for margins and haircuts. It concludes by recommending a way forward that is intended to inform the ongoing policy discussions at the European and international levels. JEL Classification: G00

Suggested Citation

  • Battistini, Niccolò & Grill, Michael & Marmara, Pierre & van der Veer, Koen, 2016. "A Case for Macroprudential Margins and Haircuts," Financial Stability Review, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:fsrart:2016:0001:1
    Note: 1280809
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/fsr/art/ecb.fsrart201605_01.en.pdf
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    More about this item

    Keywords

    financial stability; haircuts; macroprudential margins; SFTs;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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