G2 - Financial Institutions and Services

• A Note on Central Counterparties in Repo Markets

  Staff Discussion Paper 2012-4 Hajime Tomura

  The author introduces a central counterparty (CCP) into a model of a repo market. Without the CCP, there exist multiple equilibria in the model. In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G2, G24

• When Is It Less Costly for Risky Firms to Borrow? Evidence from the Bank Risk- Taking Channel of Monetary Policy

  Staff Working Paper 2012-10 Teodora Paligorova, João Santos

  In an investigation of banks’ loan pricing policies in the United States over the past two decades, this study finds supporting evidence for the bank risk-taking channel of monetary policy. We show that banks charge lower spreads when they lend to riskier borrowers relative to the spreads they charge on loans to safer borrowers in periods of low short-term rates compared to periods of high short-term rates.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Monetary policy framework JEL Code(s): G, G2, G21