Puts in the Shadow

Manmohan Singh

No 2012/229, IMF Working Papers from International Monetary Fund

Abstract: In the aftermath of the Lehman crisis, payouts (i.e., taxpayer bailouts) in various forms were provided by governments to a variety of financial institutions and markets that were outside the regulatory perimeter - the "shadow" banking system. Although recent regulatory proposals attempt to reduce these "puts", we provide examples from non-banking activities within a bank, money market funds, Triparty repo, OTC derivatives market, collateral with central banks, and issuance of floating rate notes etc., that these risks remain. We suggest that a regulatory environment where puts are not ambiguous will likely lower the cost of bail-outs after a crisis.

Keywords: WP; OTC derivative; bank nexus; strike price; bank landscape; Fed-Treasury Accord; nonbanks investor; shadow banking; money market funds; tri-party repo; OTC derivatives; CCPs; Floating Rate Notes; collateral; SIFIs; SIBs; non-banks; Systemically important financial institutions; Asset prices; Commercial banks; Europe; Global (search for similar items in EconPapers)
Pages: 21
Date: 2012-09-01
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Citations: View citations in EconPapers (3)

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