The Effective Supply of Collateral in Australia

Belinda Cheung, Mark Manning and Angus Moore
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Mark Manning: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2014, 53-66

Abstract: High-quality assets play an important role as collateral for a wide range of transactions and activities in wholesale financial markets. Regulatory changes since the global financial crisis are increasing the demand for high-quality assets, thereby raising concerns about possible collateral shortages. This article attempts to quantify the ‘effective’ supply of collateral assets in Australia by using a measure of supply that adjusts outstanding issuance for two important features of the collateral market. One feature is that a large proportion of Australian high-quality assets is held by long-term investors that do not make these assets available for sale, loan or use in repurchase agreements. A second feature is the ability to re-use collateral assets, thereby allowing a single piece of collateral to meet multiple demands. Using a new survey that adjusts for these features, the current effective supply of Australian government debt for collateral purposes is estimated to be around $128 billion, comprising around $80 billion of active supply that is re-used on average 1.6 times. This amount would appear to be sufficient to support current demand for collateral.

Keywords: Collateral; Collateral re-use; Rehypothecation; High-quality assets; Effective supply (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (10)

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Journal Article: The effective supply of collateral in Australia
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