Models need to be able to handle a variety of “what-if” scenarios corresponding to different assumptions about behaviours under stress. Finally, we need to consider the many different sources of risk to the financial sector and take into account their cumulative effects and interactions; otherwise we may underestimate risks. for international banks that were bailed out during the crisis.
In line with its mandate, the Eurosystem strives to reduce and resolve inefficiencies at market level, including at the level of repo market infrastructures, and therefore promotes initiatives such as T2S which maximise the liquidity of market participants’ overall collateral pools. TSI can be seen as another such initiative.