The Demand and Supply of High Quality Liquid Collateral Post .ppt

1、The Demand and Supply of High Quality Liquid Collateral Post Financial Crisis Discussion at PBOC/Tsinghua Global Finance Forum,The views expressed in this discussion are those of mine and not of Moodys Investors Service,by Jian Hu, Managing Director, Moodys,12 May 2014,Agenda,Highlights of Seans pre

2、sentation Beyond Diamond and Dybvig (1983) Challenges in determining liquidity requirement Opportunities for bond markets,Highlights,“Liquidity run” affected both traditional banks and “shadow banks” and in different waysLiquidity coverage and enhanced central clearing/margin requirements are two ke

3、y aspects of the “liquidity regulation” post the financial crisisLiquidity coverage requirement is important but difficult to determineMore so for shadow banks (derivatives)Supplies of liquid assets are expected to grow but may not be in the right place,Beyond Diamond and Dybvig (1983),Diamond and D

4、ybvig (1983) Role of banks to finance long term investment with short term liabilities (deposits) Two equilibrium exist one of them is “bank run” Deposit insurance backed by government can prevent bank runBanks as liquidity providers and major sources of funding When demand deposits are not sufficie

5、nt, and equity capital is expensive, banks have to rely on debt financing The recent financial crisis demonstrates the danger of “liquidity run”,Challenges in determining liquidity requirement,Sizing liquid needsBank operations are super complexInstrument/asset dependentLiquidity need time windowEme

6、rgence of new credit characteristics and asset typesEligibility criteria/HQLA definitionSovereign bonds, corporate bonds, securitizations, covered bondsWill HQLA be at the right place (where it is most needed) at the right time (when it is most needed)?Cyclicality; regional stresses in a global econ

7、omy,Opportunities for bond markets,Will large banks be incentivized to reduce their long term lending?Koulischer and Struyven (2014): relaxing collateral policy has the potential to increase welfare by reducing the spread between the policy rate and returns in the real economyWill this stimulate the

8、 further development of bond markets?Infrastructure and local govt bondsSecuritizationMore liquidityMore supplyMore transparency,Evolution of US Bond Market Issuance (billions),Source: SIFMA, 2014 Moodys Investors Service, Inc. and/or its licensors and affiliates (collectively, “MOODYS”). All rights

9、 reserved. CREDIT RATINGS ARE MOODYS INVESTORS SERVICE, INC.S (“MIS”) CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY C

10、OME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVE

11、STMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MIS ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVES

12、TOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, F

13、URTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODYS PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODYS

14、 from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Except as expressly stated otherwise, MOODYS has not verified, audit

15、ed or validated independently any information received in the rating process, nor will it do so. Under no circumstances shall MOODYS have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise)

16、 or other circumstance or contingency within or outside the control of MOODYS or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direc

17、t, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODYS is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial report

18、ing analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained

19、herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GI

20、VEN OR MADE BY MOODYS IN ANY FORM OR MANNER WHATSOEVER. MIS, a wholly-owned credit rating agency subsidiary of Moodys Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated

21、 by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MISs ratings and rating processes. Information

22、 regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at under the heading “Shareholder Relations Corporat

23、e Governance Director and Shareholder Affiliation Policy.” Any publication into Australia of this document is by MOODYS affiliate, Moodys Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to “

24、wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODYS that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001.,