1、 https:/crsreports.congress.gov December 9, 2019Repurchase Agreements (Repos): A PrimerRepurchase agreements (repos) are a major source of short-term funding for financial institutions. Repos are a policy concern because they have long been identified as a potential source of systemic risk, meaning
2、that problems in that market could lead to broader financial instability. Characteristics Repos are legally arranged as a contract between two parties to sell a security, such as a Treasury bond, and then repurchase it at a later date at a higher prearranged price (Figure 1). Economically, a repo is
3、 equivalent to a short-term collateralized loan, with the security serving as collateral and the percentage change in price between sale and repurchase acting as the interest rate on the loan (called the repo rate). From the borrowers perspective, the transaction is called a repo (or an RP); from th
4、e lenders perspective, it is called a reverse repo (or an RRP). Figure 1. Bilateral Repurchase Agreement Source: CRS Repos characteristics vary widely, including the length to maturity, whether they last for a specified term or are open-ended, types of collateral accepted, and the size of the haircu
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