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The Changing Collateral Space
 Manmohan Singh
WP/13/25
 
 
© 201
International Monetary Fund WP/

 
IMF Working Paper
Research Department
The Changing Collateral SpacePrepared by Manmohan Singh
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Authorized for distribution by Stijn ClaessensJanuary 2013
Abstract
This paper highlights the changing collateral landscape and how it may shape the globaldemand/supply for collateral. We first identify the key collateral pools (relative to theold” collateral space) and associated collateral velocities. Post-Lehman and continuingnto the European crisis, some aspects of unconventional monetary policies pursued bycentral banks are significantly altering the collateral space. Moreover, regulatory demandsstemming from Basel III, Dodd Frank, EMIR etc., new net debt issuance, and collateralconnectivity via custodians (e.g., Euroclear/ Clearstream/ BoNY etc) will affect collateralovements.JEL Classification Numbers: G21; G28; F33; K22; G18; G15Keywords: velocity/re-use of collateral; central banks and QE; LCR; CCPs, custodians; CSDs;Author’s E-Mail Address:msingh@imf.org 
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The author would like to thank several colleagues and market participants including Stijn Claessens, andGiovanni Dell’Ariccia and Lindsay Mollineaux at the IMF, and also Phil Prince, Matt King, David Biccaregui,James Aitken, Godfried de Vidts, Darrell Duffie, Michael Clark, Peter Stella, Cedric Gillerot, Walter Verbeke,Richard Glen, Leonard Evans, Nikolaos Panigirtzoglou, Elizabeth Klee, Matthew Mcdonald and Myles Wright.Views in this paper are of the author only and not those of the IMF; any remaining errors are mine.
This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarilyrepresent those of the IMF or IMF policy. Working Papers describe research in progress by theauthor(s) and are published to elicit comments and to further debate.
 
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Contents Page
I. Introduction ............................................................................................................................3
 
II. The Old And The New Collateral Space ...............................................................................4
 
III. Factors Driving The Collateral Dynamics In The Near-Term .............................................7
 
IV. Price of Money and Price of Collateral .............................................................................11
 
V. Policy Suggestions ..............................................................................................................13
 
Figure1. The Old Collateral Space. ......................................................................................................4
 
2. The Changing Collateral Space .............................................................................................9
 
3. U.S. IOER, Fed Funds, T-Bills and GC Rates; ECB Deposit Rate and GC Collateral
........
13
 
Box1. Augmenting Rate of Return on Securities by Pledging it for Re-use………………………76Annex1. Collateral Needs in the OTC Derivatives Market—CCPs and Non-cleared Trades ......... 15
 
Table1. Under-Collateralization in the OTC Derivatives Market……………………………….... 16References…………………………………………………………………………………… 17
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