The immediate monetary effects of the repurchase transaction are the same for both interpretations: there is a change in reserve money, but no change of money narrow or wide. However, the financial arrangement approach is more appropriate to describe the transaction if short-term increase in liquidity – not ownership change – is the primary purpose of the transaction. Unlike the legalistic approach, it correctly draws attention to the increase in short-term loans from THE MA to the bank. In addition, the adoption of the legalistic approach when examining the Ma`s balance sheet, in order to determine the factors influencing the change in the reserve currency, may lead to a misinterpretation that the transaction included central bank financing for the state and not for the banking system. This last point could, for example, be misleading with regard to the monitoring of public sector credit needs in IMF-supported programmes. Treasury or treasury bonds, corporate and treasury bonds, government bonds and equities can all be used as „guarantees“ in a repurchase transaction. However, unlike a secured loan, the right to securities is transferred from the seller to the buyer. Coupons (interest payable to the owner of the securities) that mature while the pension buyer owns the securities are usually passed directly on the seller of securities. This may seem counter-intuitive, given that the legal ownership of the guarantees during the pension agreement belongs to the purchaser. Rather, the agreement could provide that the buyer will receive the coupon, with the money to be paid in the event of a buyback being adjusted as compensation, although this is rather typical of the sale/buyback. Mr.
Robinhood. „What are the near and far legs in a buyout contract?“ Access on August 14, 2020. This transaction is a quick and convenient way to borrow money for a specified period of time in order to secure with the financial instruments available. For example, if you have bonds and want to hold them until they mature, but you need the money, you can enter into a buyback transaction, i.e. lend money to the bank and mortgage the bonds. With respect to securities lending, it is used to temporarily obtain the guarantee for other purposes, for example. B for short position hedging or for use in complex financial structures. Securities are generally borrowed for a royalty, and securities borrowing transactions are subject to other types of legal agreements than deposits. The growing trend towards continuous adjustment of assets and liabilities, which characterized the 1960s and 1970s, has fostered the growth of the repo market, which became an important market for short-term funds in the 1980s. In addition, central banks have largely used deposits in money management. Pension transactions allow central banks to temporarily allocate commercial bank reserves, which has little or no impact on the performance of government bonds underlying reseat operations. The role of the repo market in the conduct of monetary policy has been particularly important in the United States, given the increased tolerance for deviation spreads in other OECD countries.
Of the OECD countries that make deposits, only the United States, France, Spain and Italy make deposits between banks and non-banks, which are considered part of the monetary aggregates. After the 2008 financial crisis, investors focused on a certain type of repo, known as Repo 105. It has been speculated that these deposits played a role in Lehman Brothers` attempts to conceal its declining financial health that led to the crisis. In the years following the crisis, the repo market declined significantly in the United States and abroad. However, in recent years it has recovered and continued to grow.