The European Repo Council of the
International Capital Market Association (ICMA) has released the results of its 29th
semi-annual survey of the European repo market.
The survey, which shows the amount of
repo business outstanding on 10 June 2015, sets the baseline figure for market
size at EUR 5,612 billion, a 2% increase from December 2014 and a 2.9% decline
from the figure recorded a year ago.
Godfried De Vidts, chairman of the ICMA European Repo Council, notes “The
stability of the headline figure over the last few surveys does not tell the
full story. The repo market in Europe is not growing in line with underlying
conditions. Increased bond issuance, extraordinary excess liquidity from LTROs
and QE, and increasing demand for collateral driven by regulation might
reasonably have been expected to produce an increase in repo trading.
“The secured financing business is
already facing significant pressure as the implementation of regulatory
initiatives such as the Leverage Ratio, Net Stable Funding Ratio, Central
Securities Depositories Regulation and Bank Recovery and Resolution Directive
begin to bite,” he continues, adding that a further study, to be released next
month, will give greater insight into the changes underlying the aggregated
The main trends in the survey show a further increase in the share of
directly-negotiated transactions, domestic repo continuing its long term
decline, and the share of tri-party repo falling back to 10.0% from 10.5%. The
outstanding value of tri-party repo reported directly by the major tri-party
agents in Europe also contracted, while there was also a drop in the share of
all government bonds within the pool of EU-originated fixed-income collateral
reported to 77.0% from 81.5%.
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