Identifying critical participants is important for central banks as operators and overseers of payment systems. The binary decision about criticality is not evident, as there are no common criteria that define it. This paper introduces a novel approach using the example of TARGET2 for tackling...

Repo markets clear either bilaterally over the counter (OTC) or through central counter-parties (CCPs), which differ in how counterparty risk is priced. In bilateral markets, repo rates reflect borrower-specific risk, while CCP clearing pools counterparties and applies a common pricing rule. We...

Central clearing counterparties (CCPs) manage counterparty risk by requiring clearing members to post margins. This paper explores the role of margins as "canaries in the coal mine:" By inducing defaults of fragile counterparties before contract maturity, margin calls enable CCPs to transfer...

This paper examines whether the SEC's mandate for central clearing of U.S. Treasury repo transactions could enable all-to-all trading and support the development of a standardized term repo market. By mitigating counterparty risk through central clearing, cash lenders may become more willing to...