Toward A Central Bank Collateral Framework for ABMI

Abstract: 

The post-global financial crisis highlighted the importance of engaging in collateralized securities financing to meet the ever-increasing market needs for liquidity and risk management. Given the heavy reliance on the volatile Eurodollar systems and the fragmented governance and limited cross-border usability of the collateral among ASEAN+3 countries, it is important to relax prevailing constraints on collateral and mobilize cross-border transactions. To address the imperatives for securing collateral-based cross-border financial markets in the region, Asia needs the initiatives of central banks to develop a regional collateral framework for better financial plumbing. By collaborating on common grounds for cross-border collateral utilization, some of the prevailing constraints on collateral use can be relaxed. The inclusive collateral framework that incorporates CBCA (Central Bank Collateral Arrangement) would provide strong initial market support for the ABMI, thus help achieve sustainable financial stability.

Keywords: ASEAN+3, Collateral, Financial Stability, Repurchase Agreement

JEL Classification: D40, F31, F37, G23, G28, G38, H12