Abbreviations 9 1 Introduction 11 2 What is High-Quality Collateral? 15 2.1 Authorities and high-quality collateral 15 2.1.1 The Basel Committee on Banking Supervision 15 2.1.2 The Eurosystem 16 2.2 A practical definition of high-quality collateral 17 2.3 Market participants and high-quality collateral 19 3 Supply of Collateral 23 3.1 The current supply of (quasi) high-quality collateral 23 3.2 Future supply of high-quality and quasi high-quality collateral 25 3.2.1 High-quality collateral 25 3.2.2 Quasi high-quality collateral 26 3.3 Summary 29 4 Demand for Collateral 31 4.1 The secured money market 31 4.1.1 The repo market and the financial crisis 31 4.1.2 Estimating collateral needs in the repo market 33 4.2 The OTC derivatives market 35 4.2.1 The derivatives market and the financial crisis 35 4.2.2 Estimating collateral needs in the OTC derivatives market 37 4.3 The Basel III liquidity standards 41 4.3.1 Banks' adjustment to the LCR and NSFR and the demand for high-quality assets 42 4.3.2 Estimating euro area demand for high quality assets due to the liquidity standards 44 4.4 Summary 44 Is Collateral Becoming Scarce? 45 5.1 Demand versus supply 45 5.2 Re-use of collateral 47 5.3 Economic effects and policy implications 48 6 Summary 51 References 55 Appendices 61 A1. Authorities and high-quality collateral 61 A2. The interdependency of the LCR and NSFR 65 * Sovereign debt with a rating between A+ and A is excluded as it is already part of the stock of high-quality liquid assets.

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