Repo bankruptcy exemption carries ‘significant costs’ – paper

Apparent liquidity boost from US rule is undermined by greater risk of fire sales, authors say

Bankruptcy

Exempting repo contracts from bankruptcy stays may appear to boost liquidity but can actually undermine it over the longer term, new research finds.

Viral Acharya, V Ravi Anshuman and S Vish Viswanathan note the majority of repo contracts in the US benefit from the so-called safe-harbour provision. This means if the seller of an asset pledged in a repo is unable to repurchase it, the buyer can liquidate the collateral even if the seller enters bankruptcy.

In partial equilibrium, this ability to

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe

You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Central Banking? View our subscription options

Register for Central Banking

All fields are mandatory unless otherwise highlighted

This address will be used to create your account

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account

.