John Thanassoulis discusses the impact of ring-fencing on bank risk using short-term repo rates. Exploiting confidential data on the near-universe of sterling-denominated repo transactions, Thanassoulis finds compelling evidence that banking groups subject to ring-fencing are perceived to be safer; repo investors lend to ring-fenced groups at lower rates, controlling for bank characteristics and collateral risk.
Co-authors: Irem Erten, Ioana Neamţu and John Thanassoulis
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Image courtesy of interviewee