Bloomberg News

Fed’s Tri-Party Repo Task Force Says More Work Need on Reforms

February 15, 2012

Feb. 15 (Bloomberg) -- A Federal Reserve-sponsored advisory panel formed to help devise ways to reduce risks and improve the efficiency of the market for borrowing and lending securities said further work was needed as the group concluded its efforts.

The Tri-Party Repo Infrastructure Reform Task Force released today its final report describing a “target state” for the industry and further changes needed to reduce risk in this primary dealer funding market, according to a note on the Federal Reserve Bank of New York’s Website.

“The complex dependencies and relationships involved in the tri-party repo infrastructure have made this collective forum essential, although now it is time for this work to move on to the next phase,” Darryll Hendricks, a managing director at UBS AG and chairman of the task force, wrote in the note. “At this time, the work that BNY Mellon and JPMorganChase, the Fixed Income Clearing Corporation, dealers and lenders need to complete to realize a target vision requires firm-specific actions, rather than the idea generation and vetting that the task force provided.”

The “target state” that the task force described as necessary to insure that the market can function effectively and efficiently, includes that secured credit for the settlement of tri-party repo trades from clearing banks being capped at 10 percent of a dealer’s notional tri-party book, that non-maturing trades not be unwound, and clear agreed upon common set of rules to govern settlement prioritization.

--Editors: Dave Liedtka, Greg Storey

To contact the reporter on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net

To contact the editor responsible for this story: David Liedtka at dliedtka@bloomberg.net


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