The (sizable) Role of Rehypothecation in the Shadow Banking System

[dkf]

5. Ah, this must be what your last sentence refers to...

"Recent regulatory efforts will require significant collateral on many fronts—Basel’s liquidity ratios, EU Solvency II and CRD IV, and moving OTC derivatives to CCPs. Unless there is a rebound in the pledgeable collateral market, the likely asymmetry in the demand and supply in this market may entail some difficult choices for the markets and the regulators.

It stands to reason that the collateral grab has been exacerbated as financial institutions anticipate the onset of these regulations. This has already led to much talk about a burgeoning collateral transformation industry, though apparently there remain questions as to how big it will get and what kinds of unintended systemic risk could result."

http://ftalphaville.ft.com/blog/2011/12/05/778301/the-decline-of-safe-assets/