ESMA research paper on level and calculation methodology of haircuts by securities financing transaction market participants
European Securities and Markets Authority report on securities financing transactions (SFTs) in the European Union and participants' use of collateral haircuts. SFTs involve mainly repurchase agreements (repos) and securities lending, and are a key source of liquidity in the EU financial system. The discounts (haircuts) applied to collateral valuation by lenders are an important risk management tool, but changing haircut requirements can contribute to pro-cyclicality and financial instability by reinforcing asset price movements.
Publisher:
Regional Standard-Setting Bodies
Release date:
Mar 2017
Type:
Consultative, discussion and issues paper
Topics:
Shadow banking, Risk management, Credit risk, Market risk
Sectors:
Banking, Insurance, Securities
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