BIS has published a paper entitled “Asset encumbrance, financial reform and the demand for collateral assets”. The paper dismisses concerns about the risk of an absolute shortage of high-quality assets that could be used as collateral to meet new regulatory requirements. Any shortage can be mitigated by private sector adjustments, but these latter will, in turn, add to interconnectedness and procyclicality in the financial system. BIS calls for strict collateral valuation and through-the-cycle haircuts, and for levels of asset encumbrance to be better disclosed and also taken into account in the price of deposit guarantee schemes. (Source: Asset Encumbrance, Financial Reform and the Demand for Collateral Assets)