From the FT:
LCH.Clearnet [SA] has raised the margin, or extra deposit, it requires from clients to hold Spanish government debt, in a move that could have implications for the cost of funding for the country’s banks. Read more
Overnight deposits held by eurozone banks at the European Central Bank hit another fresh high for 2011 Monday, reflecting continuing market tension and the end of the central bank’s monthly reserve period, the Wall Street Journal reported. Banks deposited €346.36bn overnight, up from the previous 2011 peak of €334.91bn deposited overnight Friday. According to the paper the high deposit rate reflects the continuing distrust in interbank lending markets, as banks prefer to park cash overnight with the ECB rather than lend it out to other banks. Deposits also tend to rise with the approach of the ECB’s reserve period for commercial banks, says the WSJ. According to the ECB banks borrowed €8.95bn from the ECB’s overnight lending facility — an emergency facility — up from the €7.41bn borrowed on Friday. For more on the ECB’s reserve statistics as related to margin calls, see FT Alphaville.
The FT reports that some of Wall Street’s biggest banks are preparing to cut their use of US Treasuries in August as a precaution against any turbulence that could follow if warring Republicans and Democrats fail to increase soon the US debt ceiling, a senior bank chief said. One strategy, which bank executives only agreed to discuss without attribution due to the political sensitivities related to discussing Treasury debt, is to have more cash on hand to put up as collateral against derivatives and other transactions, decreasing the financial system’s reliance on Treasuries. Market Oracle has a guide to financial crisis and repo.
Encumbrance – along with collateral-shortage — is one of our favourite post-financial crisis terms.
A new paper from the Bank for International Settlement’s latest Quarterly Review deals with both in relation to central clearing, scheduled to cover all OTC derivatives by the end of next year. Read more
And dare we say, a glimpse into the future?
Regulators around the world seem set to install central counterparties (CCPs) as part of their efforts at post-financial crisis reform. But not without criticism — some commentators have likened their efforts to creating a series of AIG-type companies, or Too Big to Fail institutions, acting as insurers. Read more
Silver prices rose by over 60 per cent between the start of the year and April 25.
They’ve now fallen by over 30 per cent — unwinding some 80 per cent of the upward move in the space of two weeks, according to Société Générale figures. Such violent swings have lead to margin call hikes on the precious metal (along with other commodities) at the Chicago Mercantile Exchange, and have also unleashed a wave of debate about just how much margin moves may have attributed to price falls. Read more