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Introduction (partial) "Summary results from the first stage of the quantitative impact study (QIS1) on the proposed framework for numerical haircut floors on non-centrally cleared securities financing transactions have been published in the FSB document on 29 August (hereafter the August 2013 Report). This document aims to extend the analysis of QIS1 data to examine the procyclicality of haircuts and its role during the global financial crisis. The procyclicality of haircuts has been documented widely in the academic literature. However, most of the existing literature is focused on the US market and based on somewhat limited data sets. The QIS1 exercise provides a unique global data set to study the behaviour of the repo market during the crisis on a global scale. In particular, the QIS1 data set offers a perspective on the following key questions: - Are haircuts procyclical? - Gorton and Metrick (2011) presented evidence that repo haircuts increased in the US bilateral repo market during the crisis. However, Copeland, Martin and Walker (2011) found that investors in the US tri-party repo market tended to stop lending completely rather than increasing haircuts during the crisis. - Did the repo market play an important role in securitisation and shadow banking in the run-up of the crisis? - Adrian and Shin (2009) showed that repo transactions accounted for most of the procyclical adjustment of the leverage of investment banks in the US. However, Krishnamurthy, Nagel and Orlov (2012) found that the contraction of repos as an available funding source for financing non-Agency MBS/ABS prior to the crisis appeared small for the shadow banking system as a whole."

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