In this respect, you will have seen in a recently published Opinion of the ECB on, inter alia, amendments to the EU Capital Requirements Regulation (CRR), that the ECB supports the review of the calculation method for the leverage ratio.16 I have also previously voiced support as CPMI Chair for implementing the leverage ratio in a way that does not create disincentives for centrally cleared transactions, namely by offsetting the initial margin in the case of derivative exposures related to client clearing.17 All these exercises, however, should not be mistaken for tolerance of a relaxation of regulation. Post-crisis reforms aim to curb excessive leverage and reliance on short-term wholesale funding, and for good reasons. This is also why the Financial Stability Board (FSB) has published specific recommendations, including a framework for minimum haircuts for securities financing transactions (SFTs).18 The FSB has also assessed the potential financial stability risks related to collateral re-use in SFTs.19 The latter may contribute to a build-up of leverage and increase interconnectedness among market participants. The FSB concluded that regulatory reforms, in particular the leverage ratio and the liquidity requirements, are important to mitigate these risks. 8 / 10  BIS central bankers' speeches  This means that the implementation of the Basel III reforms will have effects on repo markets, as intended. These might look undesirable from an institution-perspective but they will have systemwide benefits. Conclusion Let me conclude. The repo market is undergoing significant change.
Increasing scarcity in that segment of the cash 5 / 10  BIS central bankers' speeches  market then also translated into a persistent rise in the specialness premia of such bonds, even when abstracting from year-end effects. Our decision to accept cash as collateral in securities lending, and to allow purchases below the DFR, contributed to relieving this pressure. Premia across maturity buckets are now broadly similar. The relatively low specialness premia for bonds with shorter maturities, in turn, also suggests that the majority of holders of such bonds – mainly non-euro area investors without access to our deposit facility, as I illustrated in a previous speech – were, and remain, generally willing to provide them in sufficient quantity in the repo market.10 Yet, this chart also reinforces the point I made earlier about the flow and stock effects of our purchases: with the effective supply of bonds gradually shrinking over time as a result of our purchases, specialness premia have been persistently inching upwards.11 While stock effects reinforce one of the key transmission channels of the APP by increasing the “value for money” – the bang for the buck – of new net purchases in terms of their impact on financial conditions, we also need to be mindful that a shortage of government bonds may over time adversely affect the intermediation capacity of repo markets. There are two reasons for this. First, government bonds are the main type of collateral used in repo markets, primarily because of their safety and liquidity.