Understanding the role of collateral in financial markets

Collateral is a fundamental building block of financial markets and affects economic growth and financial stability. It lowers risks for lenders and borrowers alike, by providing protection to lenders and allowing borrowers to receive more credit at better rates, and plays a major part in a variety of market functions. However, policymakers often overlook the important role collateral plays in financial plumbing – the financial infrastructure and the various institutions that support trading, payments, clearing, and settlement – and for the economy as a whole.

On February 23, the Economic Studies Program at Brookings hosted an event featuring Manmohan Singh of the International Monetary Fund. Mr. Singh discussed his new book, Collateral and Financial Plumbing (Risk Publications), and a panel of experts responded to his conclusions. Douglas J. Elliott of Brookings moderated the event.