Repurchase agreements and systemic risk in the European sovereign debt crises: the role of European clearing houses
Angela Armakola,
Raphael Douady (),
Jean-Paul Laurent () and
Francesco Molteni ()
Additional contact information
Angela Armakola: PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne
Jean-Paul Laurent: PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne
Francesco Molteni: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EUI - European University Institute
Working Papers from HAL
Abstract:
This article investigates the European repo market and its role as an amplification channel for sovereign-debt crises. We focus on transactions cleared via central clearing counterparties (CCPs), which account for the bulk of the repo market in the Eurozone. In particular, we collect novel data on repo haircuts applied on sovereign bonds and assess the methodologies used by CCPs for margining. We find that haircuts on peripheral sovereign bonds substantially increased in response to the rise in sovereign risk. Moreover, we document that the volume of the European repo market is strongly concentrated between few large financial institutions and few clearing houses. The procyclicality of haircuts and the concentration of secured transactions raise concerns about the CCP-intermediated repo market as asource of systemic risk in the Eurozone. This is however mitigated by the countercyclical monetary policy of the European Central Bank (ECB).
Keywords: systemic risk; sovereign debt crises; central clearing counterparty; haircut; repo; CCP; sovereign debt crisis (search for similar items in EconPapers)
Date: 2020-02-18
Note: View the original document on HAL open archive server: https://hal.science/hal-01479252
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://hal.science/hal-01479252/document (application/pdf)
Related works:
Working Paper: Repurchase agreements and systemic risk in the European sovereign debt crises: the role of European clearing houses (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-01479252
Access Statistics for this paper
More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().