Collateral and risk mitigation frameworks of central bank policy operations – a comparison across central banks

Abstract

Domestic and foreign financial assets of all central banks and public wealth funds worldwide are estimated to have reached more than USD 12 trillion in 2007. How do these institutions manage such unprecedented growth in their financial assets and how have they responded to the 'revolution' of risk management techniques during the last fifteen years? This book surveys the fundamental issues and techniques associated with risk management and shows how central banks and other public investors can create better risk management frameworks. Each chapter looks at a specific area of risk management, first presenting general problems and then showing how these materialize in the special case of public institutions. Written by a team of risk management experts from the European Central Bank, this much-needed survey is an ideal resource for those concerned with the increasingly important task of managing risk in central banks and other public institutions.

Dual Liquidity Crises Under Alternative Monetary Frameworks: A Financial Accounts Perspective

“…In pursuing the latter policy, the Eurosystem benefitted from the fact that it has always accepted a rather broad collateral set (see e.g. Tabakis and Weller, 2009, also for a comparison with the pre-crisis collateral frameworks of othercentral banks). Most importantly, it had only one collateral set for both regular repo tenders and the marginal lending facility for overnight loans at a penalty rate.…”

Dual Liquidity Crises under the Gold Standard and in a Monetary Union

“…In pursuing the latter policy, the Eurosystem benefited from the fact that it has always accepted a rather broad set of collateral (see, for example, Tabakis and Weller, 2009). banks' demand for central bank credit at a given interest rate was always fully satisfied) and (ii) its collateral policy.…”