12. Conclusion

Manmohan Singh
Published Date:
October 2016
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Some of the messages in this book have reached policymakers in Europe (ECB, Bank of England, Banque de France, European Commission, CPSS-IOSCO, FSB, etc), and in the US and Canada (CFTC, SEC, Board of Governors in Washington, DC, and Atlanta, Chicago and New York Feds, Bank of Canada, etc). Also, some financial circles in Australia and Asia – Sydney, Singapore and Hong Kong – have acknowledged the importance of collateral in global financial plumbing. Similarly, the collateral desks of some of the largest banks active in this market and key players in the non-bank sector (eg, global custodians like Euroclear, Clearstream, BoNY) also appreciate this line of research.

Lately, dissertations from MIT, Stanford etc, suggest academic interest to provide the macro-underpinning (or “theory”) to financial plumbing.

Over the past few years, the author has also had several opportunities to gain valuable feedback from presentations made to both the official and private sectors. The book has attempted to highlight an aspect of finance that existed but one that no one cared to explain thus far.

We hope the material has helped readers to think beyond money (such as broad money metrics like M2). Central banks may also consider incorporating pledged collateral data in their monetary policy decisions (for example, the US Fed does not produce M3 data any more, and much of this financial plumbing is about M3 data). Others in the official sector, such as the regulators, may better appreciate these issues as they finalise several proposals on these topics. Academia still does not include pledged financial collateral in its “money and banking” or “monetary policy” courses or models. Perhaps the quantitative easing type experiment may force the orthodox schools to look at this book and encourage their faculties and students to think beyond the normal.

There has been a plethora of draft regulations aimed at reducing risk in the global financial market; however, little in the way of economics has found its way into the broad-brushed and politically charged regulatory agenda. Readers who consider the present regulatory overhaul of the financial system to be rushed will, we hope, find that the book provides persuasive economic reasoning to mull over and better understand the forthcoming changes. The book has also (indirectly) striven to navigate some areas of proposed regulations that straddle financial plumbing, and we hope it positively impacts the final drafting.

Our sincere hope is that this book will reach a larger audience, as there remains a continued interest in these topics. The book invites anyone who straddles financial decision making to give it a read – whether they are a policy official or CEO of a large bank, or household investors trying to reshuffle their own retirement portfolio. The book should serve as a reference guide, especially as this vocabulary expands (for example, words such as “rehypothecation” and “collateral velocity” are now increasingly used in the financial media). We hope readers will find greater appreciation of these topics, which may seem arcane or isolated at first sight (such as central clearinghouses, OTC derivatives, repo, sec-lending and so forth). The collateral aspects bring these isolated themes cogently into one book.

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