ECB paper flags risk of ‘collateral damage’ from financial transaction tax
Financial transaction tax could limit access to central bank liquidity
Research published by the European Central Bank on May 22 seeks to quantify the impact of a rise in transaction costs on the availability of collateral, in light of proposals for a financial transaction tax in Europe.
In the working paper, Collateral damage? Micro-simulation of transaction cost shocks on the value of central bank collateral, authors Rudolf Alvise Lennkh and Florian Walch test the impact of a 10-basis point rise in transaction costs, finding aggregate collateral value falls 0.3%
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