00000nam 2200000za 4500 9.816511 CaOODSP 20221107142253 cr ||||||||||| 160428s2016 oncd ob f000 0 eng d CaOODSP eng eng fre n-cn--- FB3-5/2016-16E-PDF Asset encumbrance, bank funding and financial fragility [electronic resource] / by Toni Ahnert … [et al.]. [Ottawa] : Bank of Canada, 2016. iii, 44 p. : fig., tables Staff Working Paper, 1701-9397 ; 2016-16 "April 2016." Includes bibliographical references (p. 29-31). How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt and expand profitable investment, but it also concentrates risk on unsecured debt and thus exacerbates fragility and raises unsecured funding costs. Deposit insurance or wholesale funding guarantees induce excessive encumbrance and fragility. To mitigate such risk shifting, we study prudential regulatory tools, including limits on encumbrance, minimum capital requirements and surcharges for encumbrance. gccst Banks gccst Assets gccst Funding gccst Regulation Ahnert, Toni. Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2016-16 (CaOODSP)9.806221 PDF 1.17 MB https://publications.gc.ca/collections/collection_2016/banque-bank-canada/FB3-5-2016-16-eng.pdf