Repo market functioning

Bank for International Settlements
Authors registered in the RePEc Author Service: Ashish Kumbhat

No 59 in CGFS Papers from Bank for International Settlements

Abstract: Repo markets play a key role in facilitating the flow of cash and securities around the financial system. The CGFS Study Group on repo market functioning analysed changes in the availability and cost of repo financing, and how these affect the ability of repo markets to support the financial system, both in normal and stressed conditions. The Group focused on repo transactions backed by government bonds. Repo markets are in a state of transition and differ across jurisdictions in terms of both their structure and their functioning. Underneath the relative stability in headline measures of activity and pricing, there are signs of banks being less willing to undertake repo market intermediation, compared to the period before the crisis. The volatility in prices and volumes around balance sheet reporting dates can be associated with banks in some jurisdictions contracting their repo exposure in order to "window dress" their regulatory ratios. The report identifies several drivers behind these changes including exceptionally accommodative monetary policy, which provided ample central bank liquidity to the market and reduced the need for banks to trade reserves through the repo market, and changes in regulation, which have made intermediation more costly in terms of regulatory capital. Considered from the narrow perspective of repo markets, the balance between the costs and the benefits of these changes is unclear and differs across jurisdictions. The effect of market adaptations will require more time to mature. Measures that have been adopted by some central banks to reduce the scarcity of certain repo collateral, and others initiated in certain jurisdictions with the objective of facilitating monetary policy, have improved repo market functioning.

Date: 2017 Written 2017-04
ISBN: 978-92-9259-041-3
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.bis.org/publ/cgfs59.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/cgfs59.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biscgf:59

Access Statistics for this book

More books in CGFS Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().