Market disruptions in response to the COVID pandemic spurred calls for the consideration of marketwide central clearing of Treasury securities, which might better enable dealers to intermediate large customer trading flows. We assess the netting efficiencies of increased central clearing using...

This paper investigates a model of strategic interactions in financial networks, where the decision by one agent on whether or not to default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism introduced in the seminal contribution...

A central counterparty (CCP) is a financial market utility that lowers counterparty default risk on specified financial contracts by acting as a buyer to every seller, and as a seller to every buyer. When at risk of failure, a CCP could be forced into a normal insolvency process such as...

This ESRB Occasional Paper complements the publication of indicators on central counterparties (CCPs) in the ESRB's Risk Dashboard as part of its monitoring framework. It provides a methodological background to the development of the individual measures and discusses different aspects that...

On September 3-4, 2009 SUERF and Utrecht University School of Economicsorganized the Colloquium "The Quest for Stability" in Utrecht, the Netherlands. The papers included in this SUERF Study are based on contributions to the Colloquium.

The recent financial crisis has shown that financial innovation can have devastating systemic impacts. International standard setters' and national regulators' response has been a global concerted effort to overhaul and tighten financial regulations. However, at a time of designing stricter...

In this paper we describe systemic financial risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either with financial regulation or taxation. From a normative viewpoint taxation is superior in many respects. However, reality...

The paper analyzes the use of credit default swaps (CDS) for regulatory capital relief and its consequences for systemic risk. Equity capital acts as a buffer against losses, and reduces incentives for excessive risk taking. Basel capital regulation states that banks can lower capital...