Pension funds and the collateral crisis
Rising interest rates could leave pension funds facing huge margin requirements, creating an acute liquidity crisis
There has been plenty of research by regulatory bodies over the past year that have endeavoured to answer the same question: is there enough high-quality, liquid collateral in circulation to meet the demands created by mandatory central clearing, the margining of uncleared trades and the Basel III liquidity coverage ratio? The unequivocal answer has been, ‘yes, there is'.
There are, however, increasing concerns that certain derivatives users, trading certain instruments, in certain circumstances
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