LONDON Feb 14 The European Union's markets
watchdog said it will monitor the use of collateral as tougher
derivatives rules make it relatively scarcer and tempt some
banks to use lower quality assets.
The findings in the European Securities and Markets
Authority's (ESMA) first report on trends, risks and
vulnerabilities in the 27-country bloc's markets, will weaken
industry claims that a collateral crunch is looming.
ESMA estimates that Europe will need an extra 2.44 trillion
euros in collateral for 2014, and that supply will rise by 0.85
trillion euros between end 2012 and 2014.
The supply of collateral would still be 6.1 trillion euros
higher than demand in 2014, ESMA estimated.
"In view of the potential financial stability risks linked
to relative collateral scarcity, the availability and use of
collateral needs to be monitored. The availability of collateral
will thus remain a concern for a while," ESMA said.