The contraction in the repo market has come as no surprise as major players continue to decrease leverage, Godfried De Vidts, Chairman of ICMA’s European Repo Council said.
The contraction in the European repo market reflects deleveraging by banks, who are seeking to reduce their balance sheets and risk exposures, ICMA states in its survey.
“The contraction in the repo market has come as no surprise as major players continue to decrease leverage”, Godfried De Vidts, Chairman of ICMA’s European Repo Council said and called on infrastructure providers for fixed income and equities to allow full access and interoperability.
However, the European repo market has continued to function as an essential source of liquidity for financial institutions throughout the worst of market difficulties, which will confirm the shift from unsecured money markets into repo that has been taking place for many years, ICMA says.
The other main findings of the survey include:
• The share of repo trading transacted electronically has jumped from 24.4% in the last survey to 27.8% in December.
• The share of the market underpinned by Government bond collateral increased.
• Maturities have generally shortened, as banks have sought to reduce exposure further.
• Securities lending and borrowing on repo desks fell sharply.
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