{
  "title": "Emerging Market Securities Access to Global Plumbing",
  "publication": "IMF Working Papers, March 26, 2021",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2021/03/26/emerging-market-securities-access-to-global-plumbing-50268",
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  "summary": "What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers? We discuss the economics of collateral re-use and the present institutional structure in Asian and Latin American countries.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Research question: What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers?\n- Scope: Economics of collateral re-use and the present institutional structure in Asian and Latin American countries.\n- Key institutional reference: Eurozone collateral pool and its role in incentivizing asset acceptance in global plumbing."
    },
    {
      "heading": "Key findings",
      "content": "- Pledgeability:\n  - Empirical investigation suggests pledgeability enhances financial stability and reduces dollar funding risk.\n- Asset acceptability:\n  - Many securities (e.g., BTPs, Italy) are acceptable in London but not EM securities.\n- Market structure and incentives:\n  - The Eurozone collateral pool is explained as a mechanism that incentivizes EMs (and other issuers) by expanding acceptable collateral sets."
    },
    {
      "heading": "Institutional constraints and mechanics",
      "content": "- Legal and institutional barriers in Asian and Latin American countries limit the reuse of securities in international financial centers.\n- Differences in acceptance criteria across international financial centers create fragmentation (example: BTPs accepted in London; many EM securities are not).\n- Operational plumbing aspects:\n  - Liaison with International Central Securities Depositories (ICSDs) is a crucial institutional relationship for access.\n  - Global banks’ balance sheet capacity to intermediate cross-border collateral is a critical market capacity constraint."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Improve pledgeability frameworks in EM jurisdictions to enhance financial stability and reduce dollar funding risk.\n- Engage with ICSDs to address operational and custody-related barriers to cross-border collateral mobility.\n- Strengthen coordination with global banks and consider measures to expand banks’ capacity to intermediate cross-border collateral flows."
    },
    {
      "heading": "Looking forward / Market development scenarios",
      "content": "- Successful development depends on:\n  - EMs’ liaison with ICSDs to align operational and legal arrangements.\n  - Global banks’ willingness and balance sheet capacity to intermediate cross-border collateral.\n- Without improvements in pledgeability, ICSD access, and intermediary capacity, reuse of EM securities in global plumbing is likely to remain constrained.\n\nEmerging Market Securities Access to Global Plumbing — Gongpil Choi, Federico Ortega, Manmohan Singh (March 26, 2021)\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2021/03/26/emerging-market-securities-access-to-global-plumbing-50268"
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    "Authors: Gongpil Choi, Federico Ortega, Manmohan Singh",
    "Published: March 26, 2021",
    "Series: IMF Working Papers",
    "Research question: What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers?",
    "Scope: Economics of collateral re-use and the present institutional structure in Asian and Latin American countries.",
    "Key institutional reference: Eurozone collateral pool and its role in incentivizing asset acceptance in global plumbing.",
    "Pledgeability:",
    "Asset acceptability:",
    "Market structure and incentives:",
    "Legal and institutional barriers in Asian and Latin American countries limit the reuse of securities in international financial centers.",
    "Differences in acceptance criteria across international financial centers create fragmentation (example: BTPs accepted in London; many EM securities are not).",
    "Operational plumbing aspects:",
    "Improve pledgeability frameworks in EM jurisdictions to enhance financial stability and reduce dollar funding risk.",
    "Engage with ICSDs to address operational and custody-related barriers to cross-border collateral mobility.",
    "Strengthen coordination with global banks and consider measures to expand banks’ capacity to intermediate cross-border collateral flows.",
    "Successful development depends on:",
    "Without improvements in pledgeability, ICSD access, and intermediary capacity, reuse of EM securities in global plumbing is likely to remain constrained.",
    "**Working Paper**"
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