Both the intensified use of collaterals (repos, covered bonds, ECB refinancing, margins with derivatives) as well as the priority ranking of state-guaranteed retail deposits in the new EU resolution regime lead to shrinking volumes of assets available to cover unsecured funds in case of liquidation. Therefore, banks (and the ALM) have to start to actively manage the asset encumbrance. In this article we will present and discuss the different alternatives available for calculating the asset encumbrance of banks.
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