Banking on Bonds: The New Links Between States and Markets

By Daniela Gabor, Cornel Ban. 2016

189 citations recorded by the source corpus.

© 2016 John Wiley & Sons, Ltd. This article examines a neglected structural transformation in European finance: the growing importance of government debt as collateral for Europe's repo markets, where banks borrow cash against collateral. Seduced by the promises of repo market-driven financial integration, the EU institutions and Member States encouraged private finance to generate its own architecture for the European repo market in the early years of the euro, sidelining known problems about systemic fragilities. These fragilities materialized after Lehman Brothers' collapse and were exacerbated by the ECB's collateral policies. The European sovereign debt crisis shows that governments, just like private asset issuers, can rapidly become vulnerable to repo pro-cyclicality and collateral crises.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/0837789b4d3fb04196abca2e1bb80e932f53c131

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Citations in the corpus

Central banking and the infrastructural power of finance: the case of ECB support for repo and securitization markets (2020, background): “…that this de facto discrimination stood in the way of further market integration, the ECB argued that integration ‘would benefit from the extension of a euro GC approach’ that would put all government bonds in the same collateral basket (ECB, 2002, p. 66, quoted in Gabor and Ban, 2016, p. 626).”
Governing through financial markets: Towards a critical political economy of Capital Markets Union (2018, background): “Studying the causes of the crisis, economists have highlighted the financial instabilities built into market-based forms of (shadow) banking as the decisive proximate cause of both the US subprime crisis and Europe’s bank and sovereign crises (Adrian and Shin, 2010; Brunnermeier, 2009; Gabor and Ban”
The (impossible) repo trinity: the political economy of repo markets (2016, background): “Its timing the threat that the Italian government bond market would implode (Gabor and Ban, 2016) points to a fundamental contradiction at the core of the MMLR model: backstopping core markets can easily be mistaken for fiscal dominance, as the several German mem-”
Black Swans, Lame Ducks, and the mystery of IPE's missing macroeconomy (2017, background): “A notable recent exception here is the work by Gabor and Ban (2015) on repo markets, as well as the 2016 special issue on shadow banking in RIPE.”