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Daniela Gabor Profile picture
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Mar 15 • 6 tweets • 2 min read
wonder what exactly is SNB promising in terms of liquidity support to #CrediSuisse additional to the standard discount window
this is a weak statemnt - Credit Suisse already has access to SNB emergency liquidity via discount window Image
SNB discount window is very short-term - either intraday or overnight, at 10% haircut on collateral posted and a surcharge Image
SNB discount window far more stringent then Fed's on both maturity, collateral and interest rate Image
Fed BTFP: 1 year, par value for collateral, no mark to market of collateral, OIS +10bp
SNB discount window: overnight, 10% haircut on collateral portfolio, implicit mark to market, policy rate + surcharge.

wonder how much Credit Suisse can tap at BTFP
according to @dsquareddigest SNB is promising a lot more liquidity - for the global operations - though not on easier terms Image

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More from @DanielaGabor

Daniela Gabor Profile picture
Mar 16
kind of incredible, but US Fed's emergency lending to US banks was higher over the past week than during the global financial crisis/Lehman moment in 2008 Image
this is the discount window lending, there are several other - much smaller - ones, including, it turns out, the par value collateral BTFP
the Fed also changed the discount window - zero haircuts for collateral also eligible at BTFP, but didnt shift to par value (so better terms still at BTFP) Image
Read 4 tweets
Daniela Gabor Profile picture
Mar 16
Today is @ecb Zugzwang day. It will raise
Image
Read 8 tweets
Daniela Gabor Profile picture
Mar 14
when you go from protesting the bailout of tech bros to the German conservative position on sovereign debt in the next paragraph. Image
amazing how Sheila Bair, of all, would miss the macrofinancial aspects of the SVB affair, they're all gonna fall for the 'moral hazard for techbros' argument

a reminder that for years, conservative German voices fought hard at Basel and in European regulatory spaces to remove the risk-free treatment of sovereign debt in regulatory regimes.
their logic? periphery sovereigns should have all possible backstops removed.
Read 7 tweets
Daniela Gabor Profile picture
Mar 14
I'm on strike Thursday but can someone ask Mme @Lagarde if the ECB is prepared to follow the US Federal Reserve in extending par value collateral support to European banks in SVB scenario?

and then, of course, the exciting implications of that - is the ECB prepared to extend par value collateral for Italian banks pledging Italian sovereign bonds? German banks pledging Green sovereigns?
we're not going to see Macron/the Dutch complaining about a collateral subsidies race as they did about US IRA, but remember, every concession to US banks can be weaponised by European banks a la 'European regulators are so fond of sticks'

Read 4 tweets
Daniela Gabor Profile picture
Mar 13
outside the drama of US central banking, we in UK continue to live in Marie Antoinette times
the upside of poolgate is that Tories will throw other Tories under the bus for optics

a reminder half of UK workers will be on strike Wednesday the 15th just to try and make up a bit for the massive loss in living standards the Tories have inflicted upon us for the past 10 years.
Read 4 tweets
Daniela Gabor Profile picture
Mar 13
forget about SBV liabilities for a second, the real bailout story is the regime-change in the Fed's treatment of collateral:

par value goes against every risk management commandment of the past 30 years.
it turbocharges the monetary power of collateral Image
with 1990s shift in open market operations from outright purchases (of sovereign bonds) to repo loans against collateral (sovereign or other), central banks adopted 'modern' collateral valuation:
- collateral at market price rather than par
- haircut on market price Image
the logic was intuitive (and pleased German lawyers/monetarists greatly):

central banks' collateral framework must be conservative - with strict focus on high haircuts and collateral quality - to minimise moral hazard Image
Read 21 tweets

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