Hello everbody,
I'd be extremely grateful If any of you finds the time and energy to give me a short answer to the following 2 questions.
I am writing a master thesis on bonds' negative nominal rates. This leads me to analysing the costs of hoarding cash, which in turn entails to define the different forms that cash can take in the financial architecture (e.g. physical money, deposits at banks, banks' excess reserves at the central banks, etc).
By any chance, would you happen to know:
1) When institutional investors (Pension funds/MF/MMF/else) rebalance their portfolio in cash, what is cash in effect?
- Merely digital numbers? (Thus immune to breakdown of the banking sector or any public taxation/expropriation)
- Or does it need to be deposited in some institution?
2) Does it exist an institution that only hoards other investors' cash against a fee - without investing it? (The idea being for cash to be immune to shocks again)
Thanks a lot, whether you are in a position to answer or not.
Best regards to all of you.
Edouard
In my part of the world cash in the pension fund world is strictly deposits with banks, but I guess this includes short-term debt elsewhere. Pension funds don't have accounts with central banks, so it's second option - need to be deposited in some institution.
Deposit is a liability, so there would have to be an asset to it as well, vault cash or reserves at the CB if you want no investment risk at all. It's technically possible, but most custodian banks take more risk than that for sure.
Thank you very much eurokopek!
To make things absolutely clear in my head, can you confirm that - even in theory - it is not possible to have the asset side of the balance sheet made of non-invested liquidities - barely digits sleeping on your computer screen?
Is that because you have legal obligations with some institutions?
Thanks!
By non-invested I mean non-deposited either.
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