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Central bank operating frameworks and collateral markets

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  • Bank for International Settlements

Abstract

Collateral markets have become increasingly important as demand for collateral assets has increased in recent years, driven by changing market practices and an evolving regulatory landscape. This report explores whether and how the design of central banks' operational frameworks influences private collateral markets, including collateral availability, pricing, related market practices, and market performance under stress. It studies these issues by reviewing available information from a range of sources, including central bank case studies as well as surveys and interviews with private sector participants in collateral markets. Central banks influence markets for collateral through either the supply of assets available for use as collateral (a scarcity channel), the pledgeability of assets in private transactions (a structural channel), or both. They therefore have a variety of design choices at their disposal to influence collateral markets as well as to fine-tune the effects of their operations on these markets. While central bank operating frameworks are not usually the most important factor influencing collateral markets, the evidence presented in this report indicates that the influence of central banks may at times be significant, in particular during crisis times. This highlights the importance of carefully monitoring the effects of central bank operations on collateral markets, as well as the need for central banks to examine their operational frameworks to ensure preparedness for any future crisis response.

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  • Bank for International Settlements, 2015. "Central bank operating frameworks and collateral markets," CGFS Papers, Bank for International Settlements, number 53, december.
    • Handle: RePEc:bis:biscgf:53
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    References listed on IDEAS

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    Cited by:

    1. George Pantelopoulos, 2021. "Can Central Banks circumvent the impossible trinity within their operational frameworks? Theory and evidence," The World Economy, Wiley Blackwell, vol. 44(7), pages 2041-2075, July.
    2. Andreas Beyer & Benoît Coeuré & Caterina Mendicino, 2017. "Foreword – The crisis, ten years after: Lessons learnt for monetary and financial research," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 494-495-4, pages 45-64.
    3. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    4. repec:prs:ecstat:estat_0336-1454_2017_num_494_1_10781 is not listed on IDEAS

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