Those interested in the rehypothecation debate should read a paper written by Vincent Maurin of the European University Institute called Re-using the Collateral of Others: A General Equilibrium Model of Rehypothecation (EUI, March 2014). What draws attention is the claim that rehypothecation is unnecessary, that there is a more efficient alternative, and that a ban or restriction on rehypothecation would…
Tag: re-use of collateral
Repo, re-use and re-hypothecation
In the regulatory debate about shadow banking, and in particular repo, there has been much confusion about the legal terminology of collateral, some of it threatening to have substantive policy consequences. This blog is a basic primer on the difference between ‘re-use’ and ‘re-hypothecation’ of collateral. Outside the US, a repo works by means of…