Central Banks - Is Securities Lending a Solution, a Tool or a Risk Problem?

In 2008, Central Banks and securities lending have become inextricably linked. In seeking solutions to promote liquidity during the credit crunch, Central Banks have used securities lending as the tool of choice. In allowing their regulated banks to switch unwanted mortgage backed assets for prime Government Bonds owned by the Central Bank, the Federal Reserve Bank, the European Central Bank and the Bank of England have engaged in the ultimate collateral upgrade transaction.
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