Download This PaperSecurities Lending as Wholesale Funding: Evidence from the U.S. Life Insurance Industry
38 Pages Posted: 27 Jun 2016
There are 3 versions of this paper
Securities Lending as Wholesale Funding: Evidence from the U.S. Life Insurance Industry
Securities Lending as Wholesale Funding: Evidence from the U.S. Life Insurance Industry
Securities Lending as Wholesale Funding: Evidence from the U.S. Life Insurance Industry
Date Written: 2016-05
Abstract
The existing literature implicitly or explicitly assumes that securities lenders primarily respond to demand from borrowers and reinvest their cash collateral through short-term markets. Using a new dataset that matches every U.S. life insurer’s bond portfolio, as well as their lending and reinvestment decisions, to the universe of securities lending transactions, we offer compelling evidence for an alternative strategy, in which securities lending programs are used to finance a portfolio of long-dated assets. We discuss how the liquidity and maturity mismatch associated with using securities lending as a source of wholesale funding could potentially impair the functioning of the securities market.
Keywords: Securities lending, Wholesale funding, Life insurers, Market liquidity
JEL Classification: G11, G22, G23
Suggested Citation: Suggested Citation
Nathan Foley-Fisher (Contact Author)
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Borghan Narajabad
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Stephane Verani
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
HOME PAGE: http://www.federalreserve.gov/econresdata/stephane-verani.htm
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