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New York

The end of repo. Well actually not really, what has happened is that the Federal Reserve Bank of New York has published a white paper on the work of the Tri-Party Repurchase Agreement (Repo) Infrastructure Reform Task Force.

The paper, which is the group’s final report, highlights policy concerns over weaknesses in the infrastructure of the tri-party repo market and seeks public comment on the task force’s recommendations to address these concerns.

The Fed says that the recommendations set forth by the task force in its final report, when implemented, should dampen the potential for problems at one firm to spill over to others, clarify the credit and liquidity risks borne by market participants, and better equip them to manage these risks appropriately.

“We are grateful for the work of the task force and encourage all stakeholders to provide comments,” says William Dudley, president and chief executive officer of the Federal Reserve Bank of New York.

“The Federal Reserve is committed to initiating actions, as necessary, to promote strong risk management practices by all market participants and the stability and resilience of financial markets more broadly. The work of the task force represents an important step in this direction.”

The tri-party repo market and short-term funding markets will continue to evolve as broader regulatory reforms take shape, and enhancements to infrastructure, such as those proposed by the task force, are implemented, the Fed states, adding that going forward, it will be imperative to monitor the evolution of these markets closely.

The New York Fed tasked the Payments Risk Committee (PRC), a private-sector group of senior US bank officials sponsored by the New York Fed, to form a group of industry stakeholders to address tri-party repo market infrastructure weaknesses exposed during the financial crisis of 2008 and 2009.

The PRC created the Tri-Party Repo Infrastructure Reform Task Force in 2009, and included tri-party repo market participants, service providers and representatives from industry groups.

The task force met regularly since its creation to discuss enhancements to the policies, procedures and systems supporting the tri-party repo market.

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