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securities. (Understandably, Nyborg describes his work “more like forensic research”). His diligence has revealed the public list of eligible collateral in the Eurosystem runs to a mind-boggling 30,000-40,000 different secu- rities. However, the overwhelming majority have no effective market – at least as defined by prices quoted on Bloomberg – implying they cannot be traded. “There’s no role for market discipline if there’s no market”, he quips. “I want people to be aware of this, not just aca- demics.” Wider implications Equally worrying are the implications for the real economy of accepting ever lower quality assets as collateral. Among assets now eligible, for example, are wholly illiquid items like credit claims. “Lowering the eligibility criteria creates an incentive for banks to offer less liquid and higher risk assets as collateral. And what you promote in terms of collateral will have an impact on the real economy.” “If you favour low quality and illiquid collateral, more will be produced. If central bank money is only available against igloos, or igloo backed securities, then more igloos will be built.” The example may sound a fanciful play on his Nor- wegian origins, but the underlying implications are telling, considering securities based on real estate and German Pfandbriefe – covered bonds based on property – are a major element of banks’ ECB collateral. It is known there is debate within the ECB about what to accept. By next year, such discussion may become even more prominent: not only will Nyborg’s book be out, the Zurich professor will also be Program Chair for the 2016 annual meeting of the influential European Finance Association - the “club” for hundreds of university economists, whose gathering will, appropriately, be in Nyborg’s native Oslo. And a year later, he is due to become EFA President. Oec. Dezember 2015 7 Oec. Dezember 20157