Risks Posed by Securities Loans Collateralized by Cash. May 15, 2013
To address potential risks in securities loans collateralized by cash transactions, the author suggests the implementation of improved transparency practices and realignment of incentives in agent compensation arrangements. Furthermore, an increase in data transparency, in particular around cash reinvestment choices, seems likely to lower the possibility of runs and is a reasonable cost to bear if it mitigates the risk of future financial system disruption. Frank Keane is a policy advisor and assistant vice president in the Markets Group at the New York Fed.”
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