We construct the first measure of collateral re-use at the bank and bond level for the European repo market using a … than liquidity and profit from the repo rate spread. Yet, dealers also re-use collateral to source liquidity which exposes … them to collateral runs. Our results contribute to the policy debate on trade-offs between shock absorption and financial …

The ECB has accepted increasing amounts of rubbish collateral since the crisis started leading to exposure to serious …

obtaining high-quality collateral increases with demand pressures in the cash market (short-selling activities), even in calm … financial market conditions. In bear market conditions - when good collateral is needed the most - this could lead to tensions … in some asset market segments. Collateral reuse may alleviate some of these tensions by reducing the collateral scarcity …

. Therefore, the Stability and Growth Pact has been implemented as an institutional constraint to substitute for the market … mechanism. With the weakening of the Pact, market discipline could gain importance again. To strengthen market discipline … accepts all European government bonds without distinction in its monetary policy auctions as collateral. This could provide …

Analyzing a novel collateral haircut dataset, this paper investigates the relations between the collateral haircuts and … bonds with higher collateral haircuts. The importance of collateral haircuts on bond yields remains robust after controlling … for the variations in credit quality, market liquidity and the effects of the European sovereign debt crisis …

We identify the unique role of the government bond lending market in collateral transformation during periods of market … borrowing cost, and higher usage of non-cash collateral relative to non-safe assets during stressed market conditions. Moreover …, we find that market participants are able to obtain safe assets using relatively low-quality non-cash collateral …