Financial Regulatory Forum

Off Balance Sheet Repo Risks Come Back to Bite

By Guest Contributor
November 16, 2011

By Christopher Elias

NEW YORK, Nov.16 (Business Law Currents) - Off balance sheet items and undisclosed liabilities are coming back to bite companies, as repo-to-maturity disclosures prove to be a jarring reminder of pre-crisis risk proclivity.

from Christopher Whalen:

Did the FDIC really kill the repo market?

June 27, 2011

Back in April 2011, Jim Bianco penned a commentary, “Why The Federal Reserve May Have A Hard Time Raising Rates.” He argued that the increase in the FDIC insurance assessment rate for large banks adds to bank funding costs, and thus offsets the impact of Fed ease. Bianco and others infer a roughly 15bp tax or “wedge” on money market assets is created by the FDIC assessment rule.  By way of reference, the Fed’s target band for fed funds is 0 to 25bp but has been at low end of this range for months.