The search for a market design that ensures stable bank funding is at the top of regulators’ policy agenda. This paper empirically shows that an important part of the European money market features this quality, namely the central counterparty (CCP)-based euro interbank repo market. Using a unique and comprehensive data set, we provide the first systematic study of this market and show that it functions well, even during crisis episodes. CCP-based repos secured with high-quality collateral even act as a shock absorber, in the sense that repo lending increases with risk, while spreads, maturities, and haircuts remain stable.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Event Title
Joint Conference of the 21st Annual Meeting of the German Finance Association (DGF) & 13th Symposium on Finance, Banking, and Insurance