Banks have to pay up, despite win on liquidity rule

Comments (2)
Laster wrote:

Didn’t the ECB try this same stunt with their LTRO ? After a short while most anything was accepted as collateral and did lending increase?

It doesn’t bode well that regulators and banks alike are *bargain basement* shopping for collateral.

Jan 08, 2013 1:13am EST  --  Report as abuse
Nurgle wrote:

A fundamental flaw in the reasoning here is that the cash reserve requirements are not a burden for banks because they are lending, it’s a burden because the capital is tied up in often rapidly traded, highly specualtive derivative instruments and other off-book transactions reflected in VIE’s. The risk that remains present in the global financial system is enormous. In addition to real cash reserve requirements, what is badly needed is the implementation of a derivatives clearinghouse as has been legislated (but not realized) in the US. Transparency is the only quality that will project strength for financial institutions.

Jan 08, 2013 2:03am EST  --  Report as abuse
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