The Committee on the Global Financial System has released a report on asset encumbrance, financial reform and the demand for collateral assets. The report finds that the demand for high quality assets that can be used as collateral is likely to increase sharply due to a range of regulatory reforms. This increase will also be enhanced by greater reliance by banks, particularly in Europe, on collateralized funding.

The report seeks to identify the implications of these developments that may warrant monitoring and further analysis. The most significant issues for markets and policy include adverse affects on the residual claims of unsecured creditors, increased risk to deposit insurance and the cost of increased procyclicality within the financial system.