ICMA releases European repo survey
18 September 2013 London and New York
Image: Shutterstock
The European repo council of the International Capital Market Association (ICMA) has released its 25th semi-annual survey of the European repo market.
The survey, which calculates the amount of repo business outstanding on 12 June 2013, sets the baseline figure for market size at 鈧�6,076 billion.
This represents an increase of 8.6 percent in the size of the market since the last survey in December 2012.
According to the survey, the revival in repo activity in Europe appears to be driven by banks in the eurozone returning to the market for funding as they start to repay the exceptional assistance of over 鈧�1 trillion, provided to the market via the European Central Bank through the long term refinancing operations liquidity of December 2011 and February 2012.
The repayments have contributed to tighter market conditions and a steepening money market yield curve. The higher rates and greater market confidence have attracted lenders away from the European Central Bank deposit facility and back into the market.
The survey also revealed that the market share of euro-denominated repo has recovered over the same 6-month period since December 2012, now comprising 64.8 percent of the survey total.
Godfried De Vidts, chairman of ICMA鈥檚 European repo council, said: 鈥淭he long running ICMA-ERC semi-annual survey has proven to be highly valuable as arguments around the repo markets have flared up in regulatory discussions of late. The ERC will publish shortly a view on how a more comprehensive gathering of data may be accomplished.鈥�
鈥淭oday鈥檚 survey shows a healthy market that provides cash/collateral liquidity between interbank market participants in a secured way as mandated by Basel. This in itself provides a much safer way of distributing liquidity, in contrast to unsecured lending where counterparties are 100 percent exposed to each other. I hope the value of the repo product continues to be recognised while we engage with policy makers on the new framework as highlighted in the recent FSB report.鈥�
Click here to download a full copy of the survey.
The survey, which calculates the amount of repo business outstanding on 12 June 2013, sets the baseline figure for market size at 鈧�6,076 billion.
This represents an increase of 8.6 percent in the size of the market since the last survey in December 2012.
According to the survey, the revival in repo activity in Europe appears to be driven by banks in the eurozone returning to the market for funding as they start to repay the exceptional assistance of over 鈧�1 trillion, provided to the market via the European Central Bank through the long term refinancing operations liquidity of December 2011 and February 2012.
The repayments have contributed to tighter market conditions and a steepening money market yield curve. The higher rates and greater market confidence have attracted lenders away from the European Central Bank deposit facility and back into the market.
The survey also revealed that the market share of euro-denominated repo has recovered over the same 6-month period since December 2012, now comprising 64.8 percent of the survey total.
Godfried De Vidts, chairman of ICMA鈥檚 European repo council, said: 鈥淭he long running ICMA-ERC semi-annual survey has proven to be highly valuable as arguments around the repo markets have flared up in regulatory discussions of late. The ERC will publish shortly a view on how a more comprehensive gathering of data may be accomplished.鈥�
鈥淭oday鈥檚 survey shows a healthy market that provides cash/collateral liquidity between interbank market participants in a secured way as mandated by Basel. This in itself provides a much safer way of distributing liquidity, in contrast to unsecured lending where counterparties are 100 percent exposed to each other. I hope the value of the repo product continues to be recognised while we engage with policy makers on the new framework as highlighted in the recent FSB report.鈥�
Click here to download a full copy of the survey.
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