First, the level of collateral received that has been rehypothecated indicates firms' reliance on "customer collateral" generated through secured lending activities and derivatives to raise financing, from both internal and external sources; these data allow us to directly measure the banks' "collateral efficiency," as we have defined it.
We first display a measure of "collateral efficiency," which we earlier defined as the percentage of a dealer bank's collateral received that is rehypothecated.
In Chart 3, we also measure the amount of rehypothecated collateral, recalling that this is the numerator in our measure for collateral efficiency.
The thick blue line indicates the total amount of collateral pledged, with the thin black line representing the portion of collateral pledged that was sourced from other secured transactions and has been rehypothecated.
At that time, the level of collateral that had been rehypothecated and repledged exceeded the total secured liabilities reported on-balance-sheet by $156 billion, which indicates a very high level of collateralized financing efficiency.
This excess cash usually earns a short-term money market rate for the counterparty that posted it, and so to the extent that it can be rehypothecated, represents a very low-cost source of funding for the dealer banks.
securities and rehypothecated those securities to repay loans in the
been rehypothecated, motivating the intermediary's customers to
that Lehman's European prime-brokerage arm rehypothecated $22
collateral to be rehypothecated (by requiring prime brokers to use
that exempting rehypothecated securities rendered the limitations unable
exempt rehypothecated securities from commercial-law protections).