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For example, the European Central Bank holds credit offerings in US dollars for periods of seven days and three months, offering as much in dollars as European banks may want in return for collateral such as bonds or other securities.
Providers of synthetic ETFs argue that there is plenty of counterparty risk in physical funds, too, because the funds' securities are routinely being lent out to other investors in return for collateral.
But I am told that the main auction being looked at by the SFO was the 2008 Special Liquidity Scheme, in which the Bank lent 32 banks and building societies £185bn, in return for collateral of £287bn, in the form of assets that the banks could not shift to anyone else (such as mortgage backed bonds).
Similar(57)
The prime brokers' habit of making cheap loans to hedge funds in return for poor collateral may well be over.
A person close to the Citibank transaction said that the bank had essentially agreed to extend the maturity of that loan and to allow Enron to borrow more money in return for the collateral.
The ECB asks banks for collateral in return for taking out cheap loans.
Finland is also close to resolving a dispute about its demand for collateral in return for granting more aid to Greece.
It may be able to increase the incentive for reform by offering more aid in return for some form of collateral from privatized state assets.
Because Finland has taken such a hardline stance with Greece, demanding collateral in return for its aid packages.
The banks, whose debt is not secured by any of HealthSouth's assets, are expected to demand collateral in return for giving HealthSouth access to the credit line.
Officially, the Fed won't be buying mortgage-backed securities outright: it's only accepting them as collateral in return for loans.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com