QE continues to pressure securities financing
April 19, 2017

The European Central Bank's (ECB) decision to stick to its bond buying programme despite strong EU-wide economic growth has damped hopes in the market that interest rates will rise any time soon, notes Clearstream in its latest monthly report. This loose monetary policy can be felt in the real economy and has effects that reach into the post-trade business.

"Quantitative easing has major implications for the securities finance industry, in particular when it comes to capital requirements and risk management", says Philippe Seyll, Co-Chief Executive Officer at Clearstream Banking SA.

Over the past years, by withdrawing government securities from the market, the ECB's QE has reduced the volume of high quality (HQLA) securities available to borrow in the market. This makes it difficult for market participants to get the collateral they need in order to fulfil regulatory requirements and manage risk effectively.

The collateral scarcity has left the European repo market dry, while on the other hand an increasing demand for borrowing HQLA can be observed. The need for liquidity becomes particularly urgent during key reporting periods towards the end of the quarter or year respectively.





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The European Central Bank's (ECB) decision to stick to its bond buying programme despite strong EU-wide economic growth has damped hopes in the market that interest rates will rise any time soon, notes Clearstream in its latest monthly report. This loose monetary policy can be felt in the real economy and has effects that reach into the post-trade business.

"Quantitative easing has major implications for the securities finance industry, in particular when it comes to capital requirements and risk management", says Philippe Seyll, Co-Chief Executive Officer at Clearstream Banking SA.

Over the past years, by withdrawing government securities from the market, the ECB's QE has reduced the volume of high quality (HQLA) securities available to borrow in the market. This makes it difficult for market participants to get the collateral they need in order to fulfil regulatory requirements and manage risk effectively.

The collateral scarcity has left the European repo market dry, while on the other hand an increasing demand for borrowing HQLA can be observed. The need for liquidity becomes particularly urgent during key reporting periods towards the end of the quarter or year respectively.



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