For example, the EONIA rate – the rate of unsecured overnight lending between some of the largest euro area banks – is an important first link in the chain of monetary policy transmission. Ever since the financial turmoil started in August 2007 – more than five years ago – and then became a severe crisis with the bankruptcy of Lehman Brothers one year later in  1  I wish to thank Fiona van Echelpoel, Benjamin Hanssens, Florian Heider, and Marie Hoerova, for their contributions to this speech. I remain solely responsible for the opinions contained herein. 2  CPSS report: “Strengthening repo clearing and settlement arrangements”, September 2010. BIS central bankers’ speeches  1  September 2008, money markets have not been operating smoothly. The outbreak of the financial crisis has been well documented, but it is worthwhile recalling the extent of the shocks, which are still being felt today. 3 Within a few days after the demise of Lehman Brothers on 15 September 2008, the EURIBOR-OIS spread, which had been zero a little over 12 months before, rose to a staggering 186 basis points (in the United States the spread rose to 365 basis points). In addition, cash-rich banks were apparently no longer lending to cash-poor banks. The flow of liquidity in the financial system came to a sudden stop. Prior to the bankruptcy of Lehman Brothers, banks hardly ever deposited funds at the ECB (where they earn the deposit facility rate, which at the time was 1% less than the policy rate).
13 Trade repositories provide a comprehensive overview of the transactions in the markets they serve, which contributes to better risk management, public supervision and oversight as well as market discipline. The ECB actively supports the current work to develop such a central database for the EU repo market. 14 It could be established in a joint effort by public authorities and the financial industry. b)  Collateral optimisation  Let me now turn to the second point on collateral optimisation. As recognised in the CPSS report, the “efficient and flexible use of collateral facilitates market participants’ collateral management and can contribute to the development of liquidity and smoothly functioning repo markets”. This was considered to hold true for repo markets in normal times as well as allowing an enhancement of the resilience of repo markets in times of stress. The need for efficient and flexible use of collateral facilities has even become  12  See, for instance, D. Duffie and H. Zhu, “Does a Central Clearing Counterparty Reduce Counterparty Risk?”, Review of Asset Pricing Studies, Vol. 1, Issue 1, December 2011. 13  Trade repositories are central databases that compile and aggregate data across various execution and clearing venues. 14  See Vítor Constâncio, Introductory remarks to the ECB workshop – Repo market and securities lending: towards an EU database, 3 December 2012, see https://www.ecb.int/press/key/date/2012/ html/sp121203.en.html. BIS central bankers’ speeches  5  greater in the past couple of years, taking into account the generally increasing demands for collateral assets coming from various quarters.