Margin calls …

… seem to be on the increase.

This post by Marc Rubinstein offers a short but detailed summary of what has been going on, why and what it means for markets. Read the whole post but one of the key issues for me is increased procyclicality…

The drawback of a heavily collateralized market, though, is its tendency to inject procyclicality into the system. Periods of market turbulence can drive sharply higher collateral requirements, which can prompt more turbulence if that leads to forced selling – such as we saw in the UK last week.

Marc Rubinstein, “Net Interest” Blog – 8 October 2022

Tony – From the Outside

Author: From the Outside

After working in the Australian banking system for close to four decades, I am taking some time out to write and reflect on what I have learned. My primary area of expertise is bank capital management but this blog aims to offer a bank insider's outside perspective on banking, capital, economics, finance and risk. View all posts by From the Outside