Collateral Law and Financial (In)Stability
Maciej Borowicz received a PhD from the European University Institute in June 2016 on contract governance in the financial sector. His current research focuses on collateral law and financial stability, addressing the following questions: what kind of collateral law and under what conditions contributes to financial stability? The evolution of US collateral law and its impact on financial stability is the focus of the empirical inquiry. His preliminary findings suggest that the expansion of the scope of assets that can be used as collateral coincides with the emergence of the shadow banking system and resulted in instability in markets which are heavily dependent on collateral. Specifically, enforcement of collateral in a financial system where there is a lot of inter-bank lending secured by volatile assets may lead to financial instability. It is thus not only the provision for enforcement of security, but also the scope of assets that can be used as collateral under collateral law that may have implications for financial stability.