central banks credit debt Markets

‘Hostages To Their Own Policies’: The Fight To Stave Off The Biggest Tail Risk Of Them All

One false move...

One false move...
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1 comment on “‘Hostages To Their Own Policies’: The Fight To Stave Off The Biggest Tail Risk Of Them All

  1. As usual a very good analysis that links several topics. Central banks have to play very carefully with expectations, a key ingredient for the investment cycle in the real economy, but also to avoid volatility that can have an impact on margin calls, collateral, haircuts, and create cascade effects difficult to stop once the ball is in motion. The Basel III rules on liquidity coverage ratios and central clearing procedures don’t give banks/brokers much room when those effects begin, they can’t so easily “lend their balance sheets” as in the old days before 2008.

    A recent IMF paper went deeper into these issues, at the end there are other several links to learn more if interested https://www.imf.org/en/Publications/WP/Issues/2018/10/31/The-Morning-After-The-Impact-on-Collateral-Supply-After-a-Major-Default-46315

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