2016年-ECB欧洲央行_A_Case_for_Macroprudential_Margins_and_Haircuts_10页_377kb

Summary of "A Case for Macroprudential Margins and Haircuts"

Core Content

This special feature discusses the need for macroprudential regulation of margins and haircuts in financial markets, particularly in the context of derivatives and securities financing transactions (SFTs). It argues that current regulatory frameworks do not sufficiently address the procyclical effects of margin and haircut-setting practices, which can lead to excessive leverage and increased financial instability during market downturns.

Main Points

• Leverage and Risk in Financial Institutions: Financial institutions, including both banks and non-banks, can increase leverage through derivatives and SFTs. Margins and haircuts in these transactions directly influence the level of leverage that can be created.

• Procyclical Effects: Margin and haircut requirements tend to be set based on recent market conditions, which can lead to excessive leverage during good times and increased deleveraging during bad times. This creates a feedback loop that amplifies financial instability.

• Current Regulatory Frameworks: Existing regulations, such as EMIR, FSB, and BCBS-IOSCO, focus on setting minimum requirements and floors but do not provide macroprudential authorities with the flexibility to adjust margins and haircuts across the financial cycle. These frameworks are limited in scope and do not address the systemic risk implications of leverage build-up.

• Theoretical Evidence: A general equilibrium model suggests that:

  • A broad regulatory scope is necessary to effectively reduce leverage and volatility.
  • Time-varying countercyclical haircuts are more effective than constant minimum requirements.
  • Combining a margin floor with a countercyclical buffer significantly reduces procyclicality and increases financial stability.

• Empirical Evidence: Empirical analysis using daily stock market data supports the theoretical findings:

  • Baseline margins are indeed procyclical.
  • A margin floor would have prevented excessive margin reductions during the financial crisis.
  • Adding a countercyclical buffer further reduces margin procyclicality, especially in volatile and illiquid periods.

• Macroprudential Design Options:

  • Minimum Margin Floor: A static requirement that prevents margins from falling too low.
  • Countercyclical Margin Buffer: A dynamic tool that increases during periods of high volatility and low liquidity, reducing leverage build-up.

• Implementation Challenges:

  • Macroprudential tools must be applied to all relevant transactions, including those involving non-banks, which often operate through indirect channels.
  • Regulatory arbitrage must be prevented to ensure that macroprudential policies are effective across jurisdictions and market infrastructures.
  • Tools should be consistent across cleared and uncleared transactions to avoid shifting activity away from central clearing.

Key Recommendations

• Broad Regulatory Scope: Any macroprudential framework should cover both derivatives and SFTs, as well as centrally and non-centrally cleared transactions.

• Use of Standardised Models: Authorities should adopt a standardised, transparent model for calculating margins and haircuts, independent of internal risk models.

• Time-Varying Countercyclical Tools: A combination of a margin floor and a countercyclical buffer is recommended to effectively mitigate procyclicality.

• International Coordination: An international agreement, similar to the one on minimum haircuts for SFTs, would support consistent implementation of macroprudential tools across jurisdictions.

Way Forward

• The ongoing EMIR review provides an opportunity to introduce macroprudential margins and haircuts into European legislation.
• The Securities Financing Transactions Regulation (SFTR) can be used to implement these tools, with ESMA, ESRB, and EBA working together to prepare a report on the options.
• A comprehensive, dynamic, and internationally coordinated approach is essential to ensure the effectiveness of macroprudential regulation in reducing systemic risk.