Financial markets may be increasingly at risk of “destabilising dynamics” because of a “seismic shift” in the way collateral is used, a new article warns.

The use of collateral, notably government debt, “has become ubiquitous” as a means of securing financial transactions, four economists at the Bank for International Settlements say. This has led firms to assess collateral quality instead of borrower cashflows when deciding to lend, say Claudio Borio, Stijn Claessens, Andreas Schrimpf and