European Parliament Skeptical of FSB Approach to Minimum Haircuts

In an effort to combat the pro-cyclicality caused by changes in repo and securities lending haircuts during a crisis, the Financial Stability Board has proposed to introduce minimum standards for the calculation of haircuts.  In the belief that higher haircuts would curb the procyclical effect of risky assets and curtail the build-up of excessive leverage, they are also considering putting a floor under haircut calculations.   Responding to these recommendations, the European Parliament's Directorate General for Internal Policies has issued a paper entitled, "Shadow Banking - Minimum Haircuts on Collateral."  The white paper assesses and responds to the recommendations of a Financial Stability Board working group on the effectiveness of minimum haircut levels as a tool to enhance stability in the financial market.
Thursday, August 22, 2013/Author: David Schwartz J.D. CPA/Number of views (11075)/Comments (0)/
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