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Recent Developments in Euro Area Repo Markets, Regulatory Reforms and their Impact on Repo Market Functioning

Author

Listed:
  • Grill, Michael
  • Jakovicka, Julija
  • Lambert, Claudia
  • Nicoloso, Pascal
  • Steininger, Lea
  • Wedow, Michael

Abstract

Effectively functioning repo markets are of key importance for both financial stability and monetary policy, but the excessive use of repos may also be a source of systemic risk as witnessed during the recent financial crisis. Regulatory reforms introduced since the start of the crisis have aimed to contain systemic risk related to the excessive build-up of leverage and unstable funding, but recently some concerns have been raised about their potential effects on the functioning of the repo market. This special feature presents new evidence on the drivers of banks’ activity in the repo market with respect to regulatory reforms. In addition, it takes a closer look at the repo market structure and pricing dynamics, in particular around banks’ balance sheet reporting dates. While the observed volatility around reporting dates suggests that the calculation methodology for some regulatory metrics should be reviewed, overall, the findings indicate that unintended consequences of regulatory reforms on the provision of repo services by euro area banks have not been material. JEL Classification: G00

Suggested Citation

  • Grill, Michael & Jakovicka, Julija & Lambert, Claudia & Nicoloso, Pascal & Steininger, Lea & Wedow, Michael, 2017. "Recent Developments in Euro Area Repo Markets, Regulatory Reforms and their Impact on Repo Market Functioning," Financial Stability Review, European Central Bank, vol. 2.
    • Handle: RePEc:ecb:fsrart:2017:0002:3
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    Citations

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    Cited by:

    1. Bassi, Claudio & Behn, Markus & Grill, Michael & Waibel, Martin, 2024. "Window dressing of regulatory metrics: Evidence from repo markets," Journal of Financial Intermediation, Elsevier, vol. 58(C).
    2. Markus Behn & Giacomo Mangiante & Laura Parisi & Michael Wedow, 2022. "Behind the Scenes of the Beauty Contest—Window Dressing and the G-SIB Framework," International Journal of Central Banking, International Journal of Central Banking, vol. 18(5), pages 1-42, December.
    3. Carlos Cañón & Jorge Florez-Acosta & Karoll Gómez, 2023. "The effects of two-way lending between financial conglomerates in bilateral repo markets," Borradores de Economia 1246, Banco de la Republica de Colombia.
    4. Steffen Murau & Alexandru-Stefan Goghie & Matteo Giordano, 2024. "Encumbered Security? Conceptualising Vertical and Horizontal Repos in the Euro Area," Working Papers 262, Department of Economics, SOAS University of London, UK.
    5. Ranaldo, Angelo & Schaffner, Patrick & Vasios, Michalis, 2021. "Regulatory effects on short-term interest rates," Journal of Financial Economics, Elsevier, vol. 141(2), pages 750-770.
    6. Gerba, Eddie & Katsoulis, Petros, 2021. "The repo market under Basel III," Bank of England working papers 954, Bank of England.
    7. Luis Garcia & Ulf Lewrick & Taja Sečnik, 2021. "Is window dressing by banks systemically important?," BIS Working Papers 960, Bank for International Settlements.

    More about this item

    Keywords

    euro area repo markets; financial stability; regulatory reforms;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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