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The report notes that large internationally active banks must manage their collateral and liquidity in multiple currencies and jurisdictions, and, as a result, they are developing new techniques to conserve collateral and liquidity. Accordingly, accepting foreign assets as collateral, either routinely or only in extraordinary circumstances is an option that central banks could take in order to address commercial banks' intraday liquidity requirements.
The analyses in the report are based on the experience of the G10 central banks and the outcome of a series of interviews conducted with selected internationally active banks.
The G10 central banks have agreed on an “à la carte approach”, under which each central bank decides independently whether and, if so, under what circumstances, to accept cross-border collateral. Such an approach recognises the diversity and complexity of domestic financial markets, liquidity usage, and central bank operational structures. Furthermore, some form of coordination and cooperation among central banks may increase the effectiveness of an individual central bank’s policies and actions, or may aid the private sector in developing more advanced tools for managing collateral and liquidity.