The Euro Interbank Repo Market

The search for a market design that ensures stable bank funding is at the top of regulators' policy agenda. This paper empirically shows that the central counterparty (CCP)-based euro interbank repo market features this stability. Using a unique and comprehensive data set, we show that the mark...

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Veröffentlicht in:The Review of financial studies 2016-07, Vol.29 (7), p.1747-1779
Hauptverfasser: Mancini, Loriano, Ranaldo, Angelo, Wrampelmeyer, Jan
Format: Artikel
Sprache:eng
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Zusammenfassung:The search for a market design that ensures stable bank funding is at the top of regulators' policy agenda. This paper empirically shows that the central counterparty (CCP)-based euro interbank repo market features this stability. Using a unique and comprehensive data set, we show that the market is resilient during crisis episodes and may even act as a shock absorber, in the sense that repo lending increases with risk, while spreads, maturities, and haircuts remain stable. Our comparison across different repo markets shows that anonymous CCP-based trading, safe collateral, and the absence of an unwind mechanism are the key characteristics to ensure market resilience.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhv056