Retained covered bonds exacerbate liquidity risks

Europe space 230x150
By Bill Thornhill
10 Nov 2020

The ease with which banks have been able to deploy retained covered bonds for repo funding with central banks has aggravated liquidity risks and undermined regulations that were designed to shore up liquidity management practices exposed as inadequate during the 2008 financial crisis.

A whopping €1.3tr of liquidity was drawn under the European Central Bank’s third Targeted Longer-Term Refinancing Operations (TLTRO) this year. It is funding that must be repaid but was too good to turn down.

Easy access to the TLTRO will have boosted bank profits, helping to ...

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