A Case for Macroprudential Margins and Haircuts

Niccolò Battistini, Michael Grill, Pierre Marmara and Koen van der Veer

Financial Stability Review, 2016, vol. 1

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

Keywords: financial stability; haircuts; macroprudential margins; SFTs (search for similar items in EconPapers)
Date: 2016-05
Note: 1280809
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:fsrart:2016:0001:1

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