Alea 2012-09-15 02:00:06


Here or there

Largest Buyers of German Government Securities

Source: Finanzagentur

Zerohedge Nonsense Debunked

Why Did The Fed Inject Banks With A Record Amount Of “Other” Cash In The Past Week? [zerohedge]

Fed did not “inject” anything as zerohedge claims.

Definition: Other Deposits
U.S. law allows a number of government-sponsored enterprises (GSEs) to maintain deposit accounts at the Federal Reserve. Like the U.S. Treasury, these GSEs use their accounts to receive and make payments, which include receipts from issuing debt and payments for redeeming maturing debt. An increase in the line “other deposits” typically reflects a transfer of funds from depository institutions to one or more of these GSEs; thus, an increase in “other deposits” ordinarily is matched by a reduction in deposits held by depository institutions.

Central Bank Collateral Frameworks: Principles and Policies

IMF paper by Simon Gray, Alexandre Chailloux, and Rebecca McCaughrin

Central bank collateral policies came under pressure with the 2007-08 financial market crisis. This paper addresses the rationale for and constraints in taking collateral, and recent practices in different collateral frameworks. It then considers the risks of adverse selection. The paper concludes that (i) the collateral framework needs to include market incentives; (ii) central banks face trade-offs between risk and counterparty access; (iii) emerging markets may see pressure on collateral policies in coming years; and (iv) further work is required to develop pricing incentives and the structure of central bank facilities, both during normal times and in periods of market stress.

Velocity of Pledged Collateral: Analysis and Implications

IMF paper by Manmohan Singh

Large banks and dealers use and reuse collateral pledged by nonbanks, which helps lubricate the global financial system. The supply of collateral arises from specific investment strategies in the asset management complex, with the primary providers being hedge funds, pension funds, insurers, official sector accounts, money markets and others. Post-Lehman, there has been a significant decline in the source collateral for the large dealers that specialize in intermediating pledgeable collateral. Since collateral can be reused, the overall effect (i.e., reduced ‘source’ of collateral times the velocity of collateral) may have been a $4-5 trillion reduction in collateral. This decline in financial lubrication likely has impact on the conduct of global monetary policy. And recent regulations aimed at financial stability, focusing on building equity and reducing leverage at large banks/dealers, may also reduce financial lubrication in the nonbank/bank nexus.

Definition: IMF Quotas

Quota subscriptions are a central component of the IMF’s financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy. A member country’s quota determines its maximum financial commitment to the IMF, its voting power, and has a bearing on its access to IMF financing.

Source: IMF