Repo volumes, warnings and bailouts soar

(Editor’s note:  At the end of this column is a chronological list of repo news in 2025. It is a dismaying read. – Mary Fricker, Editor.)

The volume of repurchase transactions soared to record levels in January, even as warnings about repo instability and bailouts by the Fed are also surging.

Obviously, the gamblers aren’t listening to the worrywarts, and the Fed is freaking out.

Why is this happening?

Because (1) Wall Street traders love to use repos to speculate, (2) the skyrocketing U.S. debt is providing them with lots of U.S. Treasury securities to use as “safe” repo collateral and (3) the Fed is determined to prevent the run on repo that would trigger the next financial crisis.

Do we care?

Yes, we do.  This increases the widening wealth inequality in this country, and at some point a run on repo will outrun the Fed, like it did in 2008.

A rising chorus of critics say the surging sale of U.S. Treasuries to finance the U.S. debt threatens a strain on the repo market, where traders are supposed to buy all those treasuries, and there are no credible solutions in sight.

The crisis facing the Treasury market is not going away. If anything, it will get worse. …. Volatility is to be expected. In short, urgent attention is needed to strengthen resilience of Treasury market plumbing. –Manmohan  Singh, Journal of  Financial Market Infrastructures, February 3, 2026.

This raises the risk of disorderly unwinds of leverage, with spillover effects into the government bond markets and the real economy. There are no easy answers to address this and measures to mitigate risks are moving slowly, raising the specter of major systemic issues occurring before something can be done to address the problem.  – Martin Seagroatt, Finadium, February 11, 2026

Maybe Wall Street needs to be reminded of what Federal Reserve Chairman Ben Bernanke said in 2009:

As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression. If you look at the firms that came under pressure in that period. . . only one . . . was not at serious risk of failure. So out of maybe the 13 — 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.

Do we really want to go there again?

Four of our best thinkers on this issue published important papers recently, and all make the same points:  Making individual banks strong doesn’t make banking sound because the real danger is runs.   Banks and shadow banks have become very interconnected, and trouble at one quickly spreads to others.  A run on one will cannonball throughout the financial markets, and runs cause financial crises.   Financial risk needs to be returned to, and contained in, banking.

Don’t we know how to fix this?

Yes, we do:  Separate banking and investing, and let only banks take deposits (including repos, money market funds, commercial paper, stablecoins and any other short-term debt.)

If you think those two fixes sound a lot like restoring parts of the Glass-Steagall Act, which kept our financial markets stable from 1933 until it was gutted in 1999  (and which both Republicans and Democrats said in recent platforms that they want to reinstate), you’d be right.

“Get shadow banks out of repos,” is how I would say it.

Four important scholars

Here are the papers from the four scholars I mentioned, in chronological order of publishing:

• Arthur E. Wilmarth, Jr., George Washington University professor emeritus, said the stablecoin business must be conducted only by banks.
• Carolyn Sissoko, University of the West of England, said it’s a bad idea for the Fed to be the “market maker of last resort” for all of the financial markets, and she tells how we can easily move risk back into banking.
• Gary Gorton, Yale School of Management, and Jeffrey Zhang, University of Michigan, said making individual banks strong doesn’t make banking sound, and runnable short-term debt should be allowed only at banks, two things every generation forgets, they said.
• Viral V. Acharya, New York University Stern School of Business, with Nicola Cetorelli, New York Fed, and Bruce Tuckman, New York University Stern School of Business, said shadow banks are financed by banks, shocks spill over, and therefore banks are “exposed to systemic distress,” a problem that needs further research.

Volumes, warnings and bailouts soar

Volumes: Repos tracked by RepoWatch recently exceeded 2008 record volumes, a stunning increase that began three years ago. Here are some numbers, for average daily amount outstanding:

Total repo volume:
Prior peak: March 12, 2008, $4,567 trillion
Low:  July 11, 2018, $2,035 trillion
Today:  January 2026, $4,609 trillion
Overnight repo volume:
Prior peak: March 19, 2008: $2,999 trillion
Low:  December 30, 2015: $1,243 trillion
Today: January 2026, $3,752 trillion

Two caveats:

• RepoWatch tracks only Primary Dealers, who are approved to trade with the Fed, do much but not all of the repos, and are the only part of the market that has historical data.
• RepoWatch tracks only repurchase transactions, not reverse repurchase transactions, to avoid double counting.

Meanwhile, the Office of Financial Research reported February 10, 2026, that the full U.S. repurchase market transacts more than $13.5 trillion in outstanding repos and reverse repos daily.

Also growing are the European repo and reverse repo markets, up almost 12% in the year ended June 11, according to the International Capital Market Association.   And a number of third-world countries are starting repurchase markets, as you’ll see in the Breaking News section below.

Warnings:  RepoWatch reported 204 warnings about repo and shadow banking in its Breaking News feature in 2025, up from 156 in 2024 and 80 in 2023. And I may have missed some.

At the bottom of this column are all of the 2025 Breaking News items, in chronological order.  The boldfaced dates are the warnings.

In 2025 the main worries were (1) the deep interconnections between banks and shadow banks and (2) the so-called “regulatory fatigue,” when regulators and participants embrace risk because they’ve forgotten 2008, or they think this time is different, or they just don’t care.

In 2026 the main worries so far are (1) the huge amount of Treasury securities that the U.S. government is selling and (2) the limits on banks’ ability to buy those securities, a supply and demand problem that seriously threatens repo stability, analysts like Josh Galper at Finadium are saying.

The consultants at Finadium know repo. When they issue warnings, pay attention.

A couple of interesting insights from the Breaking News warnings:

• Observers say it’s a small percent of market participants who do the risky deals.
• Many participants seem to think repos collateralized with U.S. Treasuries are safe, forgetting the lessons we all learned in 2014, 2019 and 2020.

Bailouts:  We made it safely through the end of the year, often a time of market turmoil, which tells us the Fed’s new bailout strategies are working. For now.

Keep in mind that in the 20th century the Fed was the Lender of Last Resort only for banks.  In this century repo has forced it to expand and become the Market Maker of Last Resort for all financial markets.

In the Breaking News items below, notice the angst near the end of the year.

And notice that the Fed doesn’t call its actions “bailouts.” Instead, they’re “operations” and “management purchases.”

While these bailouts protect all Americans from much worse crises, they have big downsides. Among them are:

• They aid Wall Street speculators, not working Americans, and increase inequality.
• They encourage risk-taking and draw investors away from Main Street, middle Americans and jobs.
• They make some Americans think the Fed, controlled by bankers, doesn’t care about blue-collar Americans.
• They’re a big financial hit to American taxpayers. That’s because when the Fed makes a profit, it gives that profit to the U.S. Treasury, often about $10 billion a month. But because of the bailouts, the Fed is losing money for the first time in its history, and it stopped making monthly payments to the U.S. Treasury three years ago.

At this time, bailouts seem to have three elements:

• The Overnight Reverse Repurchase Agreement Facility, where approved banks, government agencies and money market funds can park money at a decent interest rate. At year end it held $106 billion, mainly from money market funds.
• The Standing Repurchase Agreement (Repo) Facility, where Primary Dealers and banks can get cash. Concerned that traders weren’t using the facility, the Fed has redesigned it several times recently to make it more attractive. For example, the Fed added a morning auction to the afternoon-only schedule, eliminated the $500 billion daily limit, authorized up to $40 billion per request, and changed the name of the facility to Standing Repo Operations. That worked. On Dec. 31 firms, mainly banks, drew out a record $74.6 billion in repo loans collateralized with $31.5 billion in Treasury bonds and $43.1 billion in mortgage-backed securities, helping to soothe any year-end raw nerves.
• Quantitative Easing, where the Fed buys securities from the financial markets to inject cash. The Fed began the most recent quantitative easing on December 12 and announced it will buy $40 billion of T-bills a month at least until tax-time in April. But the Fed isn’t calling this “quantitative easing.” The Fed’s calling this “Reserve Management Purchases.”

Read about how this all works here.  Watch the daily volumes of the first two programs here.   But sh-h-h-h.  Don’t call any of it bailouts.

Obviously, the gamblers aren’t listening to the worrywarts, and the Fed is freaking out.

Breaking Repo News 2025

Editor’s Note: The following list of repo news in 2025 comes from the Breaking News that I post daily at repowatch.org. Boldfaced items are the warnings. To see 2026 news, go to Breaking News that I am posting now.  – Mary Fricker, Editor.

January 2025: Crises in 2008 and 2020 show the Fed is willing to bail out markets further than almost anyone would have predicted, said economist J.W. Mason. “Today there can be little doubt that the Fed can stem the contagion from even the biggest bank failure or sovereign default, if it wishes to.”

*****

January 4, 2025:  Eliminating the safe harbor currently available in bankruptcy to repo creditors  could reduce the risk of fire sales and be “overall desirable,” especially if combined with central clearing which would not permit safe harbor, said economists Viral Acharya, Ravi Anshuman and Vish Viswanathan.

*****

January 4, 2025:  A “fruitful area for future inquiry” is whether the Fed’s role as lender of last resort raises the threat of post-bankruptcy fire sales in the repurchase market by encouraging risky trading behavior (moral hazard), said economists Viral Acharya, Ravi Anshuman and Vish Viswanathan.

*****

January 6, 2025:   In an overview of financial stability, Federal Reserve Board governor Lisa D. Cook said nonbank financial institutions, stablecoins, cyberattacks and artificial intelligence all pose risk because they are vulnerable to turmoil that can spread like wildfire to repo and other run-prone parts of the financial markets.

*****

January 9, 2025: Some observers warn of increased systemic risk in the financial markets if more traders decide to join central counterparties in order to repo Treasuries, as the SEC is requiring broker-dealers to do, Risk.net reported.

*****

January 10, 2025: The repo panic in September 2019 was caused when not enough investors, mainly money market funds, bid on the soaring volume of U.S. Treasuries being sold to finance U.S. debt.  Rates soared and the market threatened to freeze, forcing the Fed to intervene. Given rising U.S. debt, this will probably happen again, concluded a 2019 Fed study just released.

*****

January 14, 2025: “I am particularly concerned with the proliferation of activities of non-bank financial institutions, which I believe pose financial stability risks,” especially hedge funds, private credit lenders and non-bank mortgage servicing companies, said outgoing FDIC chairman Martin Gruenberg. Also worrying him are too-big-to-fail banks that are “bigger, more complex, and deeply interconnected domestically and internationally” and new technologies.

*****

January 14, 2025:  Congress should let the FDIC respond to bank crises, so banks of all sizes are treated fairly, and stop bailing out the giants, said the American Bankers Association in its policy priorities for 2025.

*****

January 15, 2025:  Seventy percent of nonbank repos with government bonds as collateral are conducted at no charge, which encourages risky borrowing, said a European Central Bank study. If regulators require at least a minimum charge, that would reduce risk, the study said.

*****

January 15, 2025:  Nonbanks like hedge funds are dramatically increasing their use of repurchase agreements with government bonds as collateral, often at no cost, and recent panics have shown this is risky, said a European Central Bank study. Mandated central clearing might help but it has shortcomings, the bank said.

*****

January 15, 2025:  Algorithms, the speed of information traveling on optic fiber and the interconnectedness of all types of financial firms may have made today’s regulations to prevent bank and repo runs obsolete, said Reserve Bank of India executive Manoj Kumar Singh.

*****

January 15, 2025:   Liability-driven investment (LDI) funds and hedge funds use derivatives and repo transactions to boost profits and can be especially vulnerable to financial instability, said a European Central Bank study.

*****

January 15, 2025: The interconnectedness of giant banks and the broader banking system can transmit systemwide the shocks caused when non-banks default on their repo transaction. That can have “severe repercussions” for the entire EU banking system, forcing central bank intervention as seen in 2020 and twice in 2022, said a European Central Bank study.

*****

January 15, 2025:  Central counterparties may not be fully implementing the standards for maintaining sufficient collateral to reduce risk that have been recommended by CPMI-Iosco (Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions), the organizations revealed.

*****

January 16, 2025:  Year-end volatility in the repurchase market was largely avoided at the end of 2024, perhaps because of significant advance preparation by all parties, including the Fed’s two standing repo facilities, and a couple of unrelated but possibly helpful Fed actions in December, said the Fed’s Teller Window report.

*****

January 17, 2025: Global risks are rising, for example financial intermediation by non-banks, and at the same time we’re seeing resistance to global regulation as memories of the 2008 crisis recede, said Andrew Bailey, governor of the Bank of England. “We will have to lay out the risks and vulnerabilities with more prominence and thereby directly challenge the naysayers,” he said.

*****

January 21, 2025:  Proposed central clearing of repos with U.S. Treasury collateral, “arguably the largest, deepest, most liquid, and most systemically important” market in the world, offers benefits but “also threatens risks of unknown and unpredictable magnitude” including how easily traders like hedge funds can evade it, report professors from Vanderbilt and Columbia universities.

*****

January 21, 2025:  FDIC acting chairman Travis Hill said, among other things, that he wants to focus more on financial risk than on process, figure out how to resolve large failing banks more frugally, and adjust capital and liquidity rules so they don’t limit economic growth but are sure to be resilient to shocks.

*****

January 22, 2025: A major challenge facing traders is the SEC rule that repo with Treasuries as collateral must be centrally cleared by June 30, 2026, said the 2025 Capital Markets Outlook by the Securities Industry and Financial Markets Association. “This is an extraordinarily complex rulemaking and significant open questions remain,” it said.

*****

January 22, 2025:  Risky securitization, when loans were pooled and securities sold to investors who often used them as repo collateral, was a key cause of the 2008 crisis. Post-crisis bank reforms have driven much securitization to non-banks, and regulators need to know how much they’re borrowing, repo-ing and interconnected with banks because that “would make them more prone to contagion and fire sale risks in times of stress, said the Financial Stability Board.

****

January 22, 2025:  The current timeline for mandatory clearing of US Treasuries and repo agreements is too aggressive and should be delayed, said Laura Chepucavage, Bank of America’s global head of financing, futures and rates, as reported by Risk.net.

*****

January 23, 2025:  The new requirement from the Securities and Exchange Commission that repos with U.S. Treasuries as collateral be centrally cleared starting June 30, 2026, “is an extraordinarily complex rulemaking and significant open questions remain,’ said SIFMA, the Securities Industry and Financial Markets Association.

*****

January 23, 2025:  A Republican wish list published by the New York Times includes eliminating the Office of Financial Research, the only government agency that tracks and discloses trading on the repurchase market. The list says the office requires financial companies to “produce sensitive, non-public information” and is “arguably one of the most political financial regulators,” presumably because it reports to the U.S. Treasury, not Congress.

*****

January 27, 2025:  Several Wall Street organizations are asking the SEC to delay by at least one year its order that repos with Treasuries as collateral be centrally cleared by June 30, 2026, Reuters reported. The groups said they believe “the Clearing Rule will provide improvements for this market,” but they need more time to implement.

*****

January 28, 2025:  Banks and non-banks, or shadow banks, are deeply interconnected, and regulators need to know a lot more about the risk that non-banks present to banking, New York University economics professor Viral Acharya told Central Banking. Banking regulators need to consider also supervising non-banks, he said.

*****

January 28, 2025: Today the Bank of England said it has opened a “Contingent Non-Bank Financial Institution Repo Facility” to lend to member insurance companies, pension schemes and liability driven investment funds in times of “severe market stress.” Members will pay an annual fee of £8,000. U.S. repo facilities charge interest on loans but do not also charge annual fees.

*****

January 28, 2025:  Prime brokers finance hedge funds, which grew 22% in the past year. This enormous industry is risky and needs transparency, as the Archegos and LDI crises showed. But brokers are too willing to do business with “clients whose risk profiles they do not properly understand and cannot adequately monitor,” said Rebecca Jackson, a Bank of England executive.

*****.

January 30, 2025:   Last year U.S. money market funds reached a record high of repo investments, with a record 33 percent cleared through sponsored repo, reported Risk.net. These trades often hide that a money market fund is financing a hedge fund’s risky basis trade because the transaction is centrally cleared.

*****

February 3, 2025:  Mutual funds’ growing investments in bond markets leads to fragility because they are subject to sudden outflows, as happened during the 2020 COVID crisis, similar to dealers who are exposed to repo contractions, said Valentin Haddad and Tyler Muir at the University of California, Los Angeles.

*****

February 3, 2025: The European Systemic Risk Board published a new way to spot repo and other risks in the financial system including non-bank financial institutions, especially investment funds, insurance corporations and pension funds. “Over the last decade, the nature of systemic liquidity has evolved due to structural changes in the financial system,” they said.

*****

February 4, 2025: Ken Wilcox, CEO of failed Silicon Valley Bank, warned that Trump’s deregulation could lead to more bank failures, saying “banks will run amok” if enforcement of bank regulations is loosened, The Banker reported.

*****

February 5, 2025:   The Federal Reserve said it will study how banks would react to non-bank financial institution shocks during a severe global recession and announce results in June. The rapid growth of non-bank financial institutions and banks’ loan obligations to them “poses risks to banks,” the Fed said.

*****

February 6, 2025: Israeli officials called for comments by March 13 on proposals to develop an Israeli repo market using government bonds as collateral.

*****

February 10, 2025:  Banks have dramatically increased securitizing and selling their business loans, rather than holding them. This protects business borrowers from shocks affecting banks but exposes them to shocks at non-banks like insurers that buy the securities, said professors at Tulane, New York and Northeastern universities.

*****

February 11, 2025:  The sudden surge in trading growth by non-banks like hedge funds, insurance firms and pension plans has benefits, but it adds multiple levels of risk, mainly runs in the repo and derivative markets as happened in 2008 and several times since, said Andrew Bailey, governor of the Bank of England. Central banks must be ready to lend at a penalty rate to stop runs, he said.

*****

February 13, 2025: In their “Rewiring Repo” report, staff at the Federal Reserve said the Fed’s two repo facilities can dampen shocks but can also discourage private borrowing and lending relationships between dealers and lenders.

*****

February 14, 2025: Repo haircuts protect lenders and borrowers from risk, but recent research found that haircuts on many Treasury repos are low or zero, and that raises concerns, said a Federal Reserve report that discusses how to set appropriate haircuts.

*****

February 14, 2025:  Firms working to meet the SEC deadline of central clearing for repo with Treasury collateral by June 20, 2026, are finding that developing the systems to conduct the trades is complex and uncertain, reported Risk.net.

*****

February 15, 2025: The Basel Committee on Banking Supervision and two other regulators released new requirements for how central clearing firms should make transparent their rules on how much collateral (“margin”) derivative and securities trades like repo must have. The report was endorsed by UK and US financial regulators but some clearing firms objected, reported Risk.net.

*****

February 17, 2025: Bank of England governor Andrew Bailey recently discussed risky trading by hedge funds, but the Alternative Investment Management Association disagrees, Finadium reported. The association said hedge funds play a minor role in market turmoil compared to central banks, mutual funds, and pension funds.

*****

February 17, 2025:  Regional banks are becoming synthetic hedge funds, and that requires a “fundamental  reconsideration of banking regulation,” said Elham Saeidinezhad, who teaches at Barnard College, Columbia University and the Stern School of Business at New York University.

*****

February 19, 2025: The Capital Markets Forum in Riyadh, Saudi Arabia, highlighted the country’s vision of becoming a leading financial hub for capital markets with “deep and liquid” securities lending operations including repo, Finadium reported.

*****

February 20, 2025: Repo activity and rates rose in the U.S. during the second half of 2024, with record inflows to money market funds largely allocated to repo, said the International Securities Lending Association. The SEC requirement that repo be centrally cleared by June 2026 could eventually be copied by international repo markets, the association said.

*****

February 20, 2025: The “significant deregulation of the financial system” by U.S. president Trump, which is “also aimed at new sectors, such as private finance, non-bank financial intermediation and crypto-assets.” is a source of concern for the European Systemic Risk Board, said first vice-chair Olli Rehn.

*****

February 20, 2025:  All major nations except the U.S. have initiated the Basel III reforms that grew out of the Great Recession, said Fed vice chair Michael Barr.  The U.S. needs to implement Basel III and address challenges like how banks get cash if there’s a run on repo and new risks presented by non-banks like hedge funds, private credit and insurance companies, he said.

*****

February 20, 2025:  Congress must not let stablecoins create a business that mimics banks but without bank safeguards and is vulnerable to disastrous repo and other runs like 2008, said George Washington University professor emeritus Arthur E. Wilmarth, Jr.  Stablecoin business must be conducted only by banks, he said.

*****

February 21, 2025: Non-banks are doing almost half of the world’s finance, and to preserve financial stability work needs to be done on money market funds, mutual funds, other sectors, and on training regulators to respond to market stress, said the chairman of the Financial Stability Board.  The board will deliver some recommendations in July, he said.

*****

February 24, 2025:  Interest-only residential loans are on the rise, reported the National Mortgage News.  These loans as repo collateral were a key weakness in the 2008 financial crisis.

*****

February 24, 2025: “A sense of optimism” was prevalent as securities finance and derivatives have “begun to gain traction” in Middle East markets, reported Finadium after attending the “Capital Markets and the Kingdom of Saudi Arabia” conference in Riyadh.

*****

February 25, 2025:  The Securities and Exchange Commission announced it is postponing implementation of central clearing for the U.S. Treasury repo market for a year, until June 30, 2027, to give firms more time to properly prepare for the big change.

*****

February 26, 2025:  The market for U.S. Treasury securities is stressed by significant changes in technology, traders, regulations, a surge in securities outstanding, and an increase in trading demand, said a Federal Reserve report. It’s possible that all-to-all trading, where anyone can trade with anyone, could help ease the stress, though there are challenges, the report said.

*****

February 26, 2025: The Treasury Market Practices Group proposed that all Treasury repo should have haircuts or margin to help avoid systemic risks to the market and asked for feedback on the proposal by April 30.

*****

February 26, 2025: Non-centrally cleared bilateral repo is opaque (authors said this 10 times), often does not require haircuts or margin to protect against fire sales and market collapse, and may be ineligible for central clearing, warned the Treasury Market Practices Group. Meanwhile, dealers typically provide the margin their clients must post for centrally cleared deals, which is not prudent and probably isn’t sustainable, the group said.

****

February 28, 2025: The financiers who created the debt securities that as repo collateral ”crashed the U.S. economy and sent the global financial system to the brink” in 2008 are back and hitting record levels, the Wall Street Journal reported.

*****

March 2025:  Large banks have a “significant” number of credit lines to real estate investment trusts, which are “substantially” sensitive to market stress, said professors at three universities who recommend ways to watch for the dangers.

*****

March 2025:  When financial markets have a crisis shortage of funds, central banks have begun acting as market makers of last resort by buying assets to prop up the market.  In the past, they made loans to troubled institutions, serving as lenders of last resort, says a report by three scholars at Northwestern University and the University of Chicago.

*****

March 2025:  Banks sponsor shadow-banking activities to circumvent regulations, said a staff report from the New York Fed. That affects whether regulations can effectively prevent bailouts which encourage a moral hazard problem, the report said.

*****

March 2025:  Non-banks have grown at “a remarkable pace” over the last twenty years, and they have become more complex and more interconnected with banks, said a New York Fed staff report. Often the money non-banks lend comes from banks, the study said.

*****

March 3, 2025:  Europe needs a way to provide temporary public funding to banks during a crisis, said a European Central Bank executive.

*****

March 4, 2025: Responding to the Financial Stability Board’s request for comments on its consultation report on Leverage in Non-Bank Financial Intermediation, the International Swaps and Derivatives Association said much more study is needed. The Alternative Investment Management Association said it proposes disruptive actions without justifying them.

*****

March 5, 2025: Corporations with high levels of debt that will have to be refinanced at today’s high interest rates raise concern about global stability, especially given the growing role of lending nonbanks that are more exposed to weak firms, rely more heavily on unstable funding sources and have more opaque financials than banks, said analysts at the International Monetary Fund.

*****

March 05, 2025: Some primary dealers and banks say the standing repo facility could be improved and the Fed is considering changes, including morning instead of afternoon auctions, said Roberto Perli, a New York Fed official. In the current U.S. debt-limit uncertainty, “there is evidence that pressures in the repo market have been gradually increasing,” but “for now, these signals from the repo market suggest no cause for concern,” he said.

*****

March 6, 2025:  Global instability makes it hard for firms to quickly and accurately adjust collateral unless they have the latest modern technology, said a Cloud Margin report, citing volatility and high margin-call volumes caused by the Covid-19 pandemic, the Ukraine conflict, a UK budget issue, the Credit Suisse crisis and US 2023 bank failures.

*****

March 6, 2025: Modern digital technologies are transforming global finance, including in managing collateral and risk, and central counterparties can play an important role, said Eurex as reported by Finadium.

*****

March 11, 2025: Since the 2008 crisis, nonbank financial firms have grown significantly in size and in their interdependence with banks, including via repo loans, said a report from the Bank for International Settlements. This can affect financial stability, the report said.

*****

March 11, 2025:   In an examination of sell-side wholesale firms, mostly brokers, the UK’s Financial Conduct Authority found firms that were not adequately prepared to meet sudden short-term financial needs, the authority reported. For example, unexpected large demands from repo lenders can trigger fire sales that spread stress to financial markets and the economy, the report said.

*****

March 12, 2025: A hot topic in financial markets is intraday repo, where repo transactions flow all day instead of at the end of the day, capturing market conditions by the minute, said Finadium.

*****

March 13, 2025:  The Basel Committee on Banking Supervision agreed to further investigate banks’ interconnections with nonbanks, with a special look at banks’ growing use of synthetic risk transfers, which banks can use to transfer risk to nonbanks and to avoid regulation.

*****

March 13, 2025:  The stunning recent growth in non-bank financial intermediaries, or shadow banks, and their interconnectedness with banks makes them a potential source of financial instability, said Olivier Nin, an executive with LCH RepoClear. Central clearing for these firms could be helpful, he said, as reported by Finadium.

*****

March 14, 2025: Australia’s Council of Financial Regulators said it thinks central clearing of the Australian bond and repo markets would be beneficial, but it prefers that the industry undertake the change, rather than it being imposed by regulators, the council said.

*****

March 24, 2025:  Hedge funds are looking to get an exemption from the SEC mandate that U.S. Treasury repos be centrally cleared, so they can clear their own trades, reported Risk.net.

******

March 25, 2025:  The New York Fed is going to experiment March 27 to April 2 with adding a morning window for repo loans through its Standing Repo Facility, which has only lent in the afternoon, reported Izabella Kaminska in The Blind Spot.  Could this be the first step toward all-day repo with the Fed, to avoid any periods where it’s hard to get financing, she asked.

*****

March 26, 2025: “Thinly capitalized hedge funds’ growing role in the enormous and rapidly expanding market for U.S. Treasury securities poses a clear and present danger to financial stability,” said a Brookings report, citing the $4 trillion of securities that the Fed had to buy to calm markets during the pandemic. Hedge funds finance their trades “almost entirely” with debt, which could be destabilizing in a crisis, the report said.

*****

March 27, 2025:  In a “seismic shift,” shadow banks, which are not regulated like banks, are increasingly doing the risky lending that banks used to do, and the shadow banks often get their financing from banks. That’s OK because it puts banks a step away from danger, said Bloomberg columnist Matt Levine.   But regulators are worried about potential dangers, said Bloomberg reporters.

*****

March 28, 2025:  When the Fed’s quantitative tightening causes banks to cut back on repo lending, threatening market disruptions, money market funds and Federal Home Loan Banks step in, said a Federal Reserve FEDS Note report. Money market funds are the largest provider of cash in repo markets, which are “vital sources of funding” for giant financial institutions.

*****

March 31, 2025: The European Commission proposed scrapping the so-called net stable funding ratio rule meant to stabilize transactions like repo because the U.S. may ignore it and put European banks at a disadvantage, Bloomberg reported.

*****

April 7, 2025: Major central banks including the U.S. Fed are reporting “substantial” operating losses, and they must adopt reforms to manage shocks more effectively, especially given today’s high public debt, digitalization and rising geopolitical turmoil, said three international economists.

*****

April 7, 2025: In spite of market volatility, there’s no sign yet of repo instability that would cause the Fed to have to intervene in the market as it did in the March 2000 COVID crisis, Bloomberg reported here and here.

*****

April 8, 2025:  Even though repo is usually short maturity with high quality of securities as collateral, for example U.S. Treasuries, it can still destabilize financial markets, especially the bilateral repo market which is opaque. The Treasury Market Practices Group at the New York Fed proposes that all repo have “prudent” haircuts (margin) to help avoid panics.

*****

April 8, 2025:  Many hedge funds are giants that are critical to modern finance, but they are lightly regulated and have no official safety nets. They need to be regulated more like banks, said Bloomberg columnist Paul J. Davies. A common overnight repo transaction, money market funds going through a broker at a major bank to a hedge fund, is vulnerable to runs.

*****

April 9, 2025:  The total value of European repo loans and borrowings for 61 major participants was down 2.3 percent for the year ended December 11, the first decline since 2020, reported the International Capital Market Association.

*****

April 9, 2025:  Today’s decline of bond prices threatened repo stability, because lenders can suddenly demand more collateral, and that grabbed the attention of Barrons, Central Banking,  Bloomberg,  Reuters, and Trump.

*****

April 9, 2025:   What would force the Fed to step in and bail out today’s financial markets, as it did in 2008 and 2000, asked Bloomberg? The trigger is when a run develops, that is, when lenders or depositors take their money back and markets start to freeze.

*****

April 9, 2025:  Bond prices stabilized today, helped by President Trump’s 90-day pause in some tariffs, many news outlets reported.

*****

April 9, 2025:   In an effort to “help get banks back into the business of lending,” the Trump administration will look for ways to expand the use of loans and other assets as collateral for loans during periods of stress, said Treasury Secretary Scott Bessent. He did not say if this was repo collateral.

*****

April 11, 2025:   U.S. Treasuries, a key security for repo collateral, lost more than 2% in value this week, the biggest drop since the repo crisis in 2019, Bloomberg reported.

*****

April 11, 2025: “Markets are continuing to function well,” said Susan Collins, head of the Boston Fed.  That said, the Fed “does have tools to address concerns about market functioning or liquidity should they arise,” she said.

*****

April 14, 2025:  The growth of nonbank financial companies brings opportunity but also risk, said Swaminathan J, Deputy Governor of the Reserve Bank of India. It’s critical that the firms’ auditors, key executives, regulators and the firm’s whistleblower system make sure the business is operating prudently. Some nonbanks do not, he said.

*****

April 14, 2025:  A number of proposed changes to the market for U.S. Treasury securities still need to be implemented to increase the market’s resilience, especially the SEC’s mandate for central clearing of much Treasury and repo, said Nellie Liang, a senior fellow at Brookings.  Set for June 2027, it should not be further delayed, she said.

*****

April 14, 2025: The Bank of England is worried that UK banks are mis-categorizing repo financing so they can hold less capital, The Banker reported.

*****

April 15, 2025:  The bank failures in 2023 made it “painfully evident” that regulators currently have no way to stop a run “other than absorbing losses by bailouts,” said two scholars from the University of Amsterdam in Yale’s Journal of Financial Crises.

*****

April 22, 2025: Global risks have “increased significantly” in the past year, said the annual Global Financial Stability Report from the International Monetary Fund. A major reason is highly leveraged nonbanks and their increasing exposure to banks, the report said. Also worrying is the Treasury repo market and the surge in treasuries to finance the ballooning debt.

*****

April 23, 2025:  Nonbanks and their interconnectedness across the financial system continue to pose a threat to the stability to international financial markets, and it’s critical that nations implement policies proposed by the Financial Stability Board to “enhance the resilience” of that sector, highlighted the outgoing board chair.

*****

April 24, 2025:  People attending the International Monetary Fund’s spring meetings generally felt that while Trump initiatives have been unsettling, financial markets appear to be stable, Bloomberg reported.

*****

April 25, 2025:   Transactions vulnerable to runs, called “runnables,” have expanded to include repo, money market funds, commercial paper, securities lending, uninsured bank deposits, stablecoins, short-term investment funds, government investment pools, private liquidity funds and ultrashort bond funds, said the Fed’s Financial Stability Report. They pose “significant systemic risk” and may require government intervention, the report said.

*****

April 25, 2025:   When central banks raise interest rates, that puts stress on short-term loans like repo, but it can be overcome with temporary loans from central banks, said an International Monetary Fund panel, as reported by Central Banking.

*****

April 26, 2025:   Four giant banks have asked the UK to abolish ring-fencing, which separates retail banking from riskier wholesale and investment banking activities and which the UK initiated in 2019 in its most significant response to the 2008 crisis, the only country to do so, reported Sky News.

*****

April 28, 2025:  Large banks are major lenders to Real Estate Investment Trusts, which are shadow banks that invest in commercial real estate, where disruptions can pose systemic risks to banks, “underscoring the need for careful regulatory scrutiny,” said an analysis for the Centre For Economic Policy Research.

*****

April 28, 2025:  U.S. Treasuries have long been the anchor of global finance but that market has become more fragile as ownership by opaque shadow bankers has roughly doubled, said a European bank executive. The market seems stable today, he said, but “the powder keg exists. Ignoring it would be a mistake.”

*****

April 29, 2025:  As banks near month-end, a shortage of funds is causing concern on the repurchase market, Bloomberg reported.

******

April 30, 2025:  Basis trades by hedge funds did not suffer panic in early April like they did when Covid-19 hit thanks to stable repo funding, less debt and rising interest rates that supported collateral values, reported Risk.net.

*****

May 2025:   Traders executing repos collateralized with U.S. Treasuries should apply haircuts (or margin), which is an important way to manage risk, said the Treasury Market Practices Group. The group this year has repeatedly expressed concern about how traders manage risk in the Treasury repo market.

*****

May 1, 2025: The European Union is losing patience with the U.S.’s delay in implementing capital reforms agreed to after the 2008 crisis, Risk.net reported.

*****

May 1, 2025: The Managed Funds Association, which represents hedge funds, warned a New York Fed group that their plan to tighten regulations on the opaque market of non-centrally cleared bilateral repos could decrease flexibility and increase risk, said Hedgeweek.

*****

May 1, 2025: Regulators worldwide are worried about excessive borrowing that may be hidden by lightly regulated, opaque investors like hedge funds, family offices, finance companies and securitization vehicles, making them vulnerable to runs and fire sales, reported the Financial Times.  But investors say concern is overblown, the Times said.

*****

May 5, 2025:   The growing number of businesses that borrow from shadow banks, mainly collateralized loan obligation vehicles and mutual funds, instead of banks are more fragile during market stress because their access to bank credit lines may be restricted, wrote analysts led by Viral V. Acharya at New York University.

*****

May 7, 2025:  A lot of unknowns need to be solved before trading with U.S. Treasuries can be moved to central clearing, as the SEC is requiring by Dec. 31, 2026, for cash trades and June 30, 2027, for repos, said panelists at a Securities Finance symposium and reported by Securities Finance Times. “We all know where we’re going — we just need to figure out how to get there,” said the moderator.

*****

May 8, 2025:  Overall, the repo market functions well, but there’s risk, said participants at the webinar “Repo market: Turmoil at the core of the financial system?” hosted by the European Money and Finance Forum. We don’t know who all the traders are, we don’t know how risky the bilateral segment is, and broker-dealers who do much of the trading – mainly with each other, hedge funds, money market funds and banks – are exposed to risky collateral, risky borrowing short to lend long, and risky trading partners.

*****

May 8, 2025: Hedge funds “substantially” funded by repos have rapidly become major buyers of the growing Government of Canada debt, which helps Canada raise low-cost funds but introduces a potential vulnerability because “hedge funds have a greater flight risk” than other potential investors, said a Bank of Canada report.

*****

May 9, 2025: The Fed will soon add an earlier daily settlement to its current afternoon auctions of its Standing Repo Facility to improve its effectiveness, and it will continue to look for other ways to make the facility more useful, said a New York Fed official.

*****

May 13, 2025: “It’s become increasingly apparent to me over the last few years that the securities finance markets are entirely interconnected,” a sales director with the electronic securities financing trading platform GLMX told a Finadium conference in London, adding that securities finance underpins all of the global debt markets and need to be well understood.

*****

May 13, 2025: African nations were granted direct access to repo transactions with more than 2,000 financial institutions worldwide, which will help their sovereign bond markets financially, “an advantage in today’s interconnected global financial markets,” said a top executive, as reported by Finadium.

*****

May 14, 2025:  Hedge funds financed by repo have become increasingly important buyers of U.S. Treasuries, but the upcoming mandatory clearing of U.S. Treasury repo could raise costs and drive them away, said editor Josh Galper at Finadium.  Convincing hedge funds to stay “could have far-ranging beneficial impacts,” but on the other hand hedge funds’ risky trading could cause a crisis and force central bank intervention, Galper said.

*****

May 14, 2025:  Centrally cleared counterparties are “critical” to financial market resilience, and regulators must make sure their margining and other practices “do not amplify shocks in times of stress,” said Sarah Breeden, deputy governor for financial stability of the Bank of

England.

*****

May 15, 2025:  European regulators need to develop a “comprehensive policy response” to nonbanks’ growing and interconnected vulnerabilities to prevent “adverse market developments across the entire financial system,” said Luis de Guindos, vice-president of the European Central Bank.

*****

May 15, 2025:  The global over-the-counter derivatives market is a “central pillar of the modern financial system” that depends on ample collateral and financing. Repo plays a critical role by enabling firms to acquire collateral, borrow cash and quickly convert collateral into cash to prevent systemic instability, said an International Swaps and Derivatives Association report. Regulators increasingly view repos and derivatives “through a similar lens,” the report said.

*****

May 15, 2025: Borrowing money to increase returns on an investment, so-called “financial leverage,” has become so big and complex compared to the real economy that it’s becoming “relentlessly less stable” and must be contained, said a Financial Stability Board official. It’s a centuries-old problem: if the leverage suddenly has to be unwound, it can “significantly amplify the harm financial markets in free fall can do to the real economy,” as in 2008 and 2023, he said.

*****

May 15, 2025:  Collateral must be readily available, often via repos or total return swaps, for derivative transactions to avoid financial crises, but recent stress events revealed that delays and inefficiencies undermine the market and “demand urgent action,” said a report by the International Swaps and Derivatives Association Future Leaders in Derivatives.

*****

May 19, 2025: Bank loans to nonbanks like private equity and private credit firms were up 20% in the past, “an opaque area of the market that has relatively little regulatory oversight,” while commercial loans were up only 1.5%, Fitch Ratings reported. Because companies that borrow from nonbanks are typically riskier, banks may be safer lending to the nonbanks than to the underlying borrowers, Fitch said.

*****

May 19, 2025:  Recently government and central banks have been providing funding directly to nonbanks in a financial crisis, which creates a “slippery slope” that saves low-quality firms, introduces moral hazard and means greater intervention will be needed in future crises, said two business professors at the universities of Southern California and Washington.

******

May 19, 2025:  “The Treasury market and money markets sit at the very core of the financial system … and these markets are tightly linked because one of the main money markets is the repo market, where Treasury securities are financed,” said Dallas Fed president Lorie Logan. They are vulnerable to “limited intermediation capacity, buildups of leverage and uneven risk management.”

*****

May 19, 2025:  It’s vital that central banks provide liquidity during times of stress. But they must take steps to minimize moral hazard, which “refers to the concern that publicly provided liquidity might encourage private financial institutions to take on excessive risk,” said Fed governor Philip Jefferson.

*****

May 19, 2025:  Banks are the connecting counterparty for most foreign exchange (FX) swaps, a repo-like derivative that has exploded in 20 years along with the growth in nonbanks and government debt, but accounting rules let banks hide much of their exposure, which like repo is vulnerable to sudden international crises, said Hyun Song Shin, an executive at the Bank for International Settlements.

*****

May 20, 2025: The Bank of England is worried that collateral some banks are using for repo transactions is not sufficiently liquid, warning that repackaging illiquid assets to appear liquid “is not sufficient, Hogan Lovells explained.

*****

May 20, 2025: “Dynamic innovation” is transforming repo, securities lending and collateral management worldwide, Finadium reported.

May 21, 2025:  Asset managers like hedge funds and pension funds have increased their repo borrowing about 65 percent since 2020, raising Bank of Canada questions about stability, Weekly Voice reported. Nearly 70 percent of hedge fund repo matures in less than a week, making them vulnerable to stress that could ripple through the entire financial system, the bank warned.

*****

May 21, 2025:  Private lending, including buying distressed debt, grew from $46 billion in 2000 to roughly $1 trillion in 2023, with much of the funding supplied by banks. This could expose banks to risk, but it’s helpful that the bank loans are typically secured and among the first to be paid off, said a Boston Fed study.

*****

May 21, 2025: Financial markets “held up well” during the crisis in early April, but while they have recovered, risk remains, said the Financial Stability Review, published by the European Central Bank. “Growing uncertainty is fueling market volatility — a trend the shadow banking industry, in particular, must take seriously,” for example making sure they can meet lenders’ unexpected demands for more collateral, an industry executive told Finadium.

*****

May 21, 2025: Nonbanks – which includes fintech companies, mutual funds, hedge funds, insurance companies, private debt providers, special purpose vehicles, among others—have become important providers of banking services worldwide and their role needs to be better understood, reported the New York Fed’s Liberty Street Economics blog.

*****

May 22, 2025:  Private repo rose from 17% of money market fund (MMF) assets in early 2023 to 33% at the end of March, with roughly a dozen MMFs accounting for most of the increase, the Office of Financial Research reported. At the Fed’s overnight reverse repo operation, limited to a maximum of $160 billion a day in deposits per fund, the four largest MMFs accounted for more than 60% of recent balances, the office said.

*****

May 22, 2025:  As pressures mount on the repo market, banks and primary dealers can borrow money overnight from the Fed’s Standing Repo Facility, which the Fed reopened in 2021 for this purpose, although the facility has some shortcomings, said New York Fed executive Roberto Perli.

*****

May 23, 2025: Given the growing role of nonbanks in corporate lending, actions by the Federal Reserve may unintentionally drive lending out of banks and into those nonbanks, “ a sector largely outside the regulatory perimeter, posing new financial stability risks,” said an International Monetary Fund working paper.

*****

May 23, 2025:  Nonbanks like hedge funds, mutual funds, life insurers, finance companies and money market funds have become important lenders, and it would be helpful to better understand the consequences of the new interconnected relationship between them and banks, said Federal  Reserve governor Lisa Cook.

*****

May 23, 2025:  To understand stability in today’s financial markets, we need a better understanding of the “shifting interaction between banks and nonbanks” and the financing of private equity and private credit companies, said Fed governor Lisa Cook.

*****

May 23, 2025: With mandatory repo clearing looming, an academics paper recommends that central clearing firms contribute up to 10 times more capital, it’s so-called “skin in the game,” Risk.net reported.

*****

May 27, 2025: South Korea is liberalizing its bond market by streamlining regulations and processes to attract more international investors, which has implications for repo and collateral, said Finadium.

*****

May 28, 2025:  Instead of lending to businesses, banks increasingly are lending to nonbanks that in turn lend to businesses, reported the Financial Times.

*****

May 29, 2025:  Regulators need to monitor collateral re-use globally because collateral chains have worsened financial crises in the past, said the Bank Underground blog for Bank of England staff. Gilt securities that are repo collateral are typically used by dealers, hedge funds, money market funds and asset managers and represent more than 85% of all repo outstanding, the bloggers said.

*****

May 29, 2025: Further research is needed into the re-use (rehypothecation) of repo collateral, blogged a Bank of England analyst. Reuse of scarce collateral increases the availability of safe assets, but it creates interconnectedness and contagion, and in the past it caused delivery failures and other emergencies in a crisis.  Typically hedge funds post the collateral for a loan from prime dealers, who re-use it to get cash from money market funds or asset managers. In recent years, 3.5% of gilt repo had reused collateral, the analyst said.

*****

May 30, 2025: “The Fed’s March 2025 survey of senior financial officers at banks showed that repo dealers do not have easy discretion to use the Standing Repo Facility and are not encouraged to participate owing to public disclosures, no netting and no observation that other firms are using it,” Finadium reported. Comparing repo to the discount window, most said the approval process was the same and they’d be more likely to consider repo.

*****

June 2, 2025:  Hedge funds reduced their repo borrowing 9 percent in the fourth quarter to $2.5 trillion, compared to same period in 2024, off of a record high in the third quarter, the Office of Financial Research reported.

*****

June 2, 2025: Regulators must expand to cover private credit companies, whose riskier loans have surged as tougher post-2008 regulations forced banks to tighten their lending standards, said the Financial Times about a Moody’s report.  Private credit has become so intertwined with big banks and insurers that it could become a “locus of contagion” in the next crisis, the report said.

*****

June 3, 2025:  Trump’s budget bill could kill the only government agency that tracks repo data, reported Alphaville at the Financial Times. An obscure provision appears to eliminate funding for the U.S. Treasury’s Office of Financial Research, set up after 2008 as an “early-warning system for financial crises.”

*****

June 4, 2025: The massive increase in Treasury securities to fund the U.S. budget, the growth in nonbank influence in the financial market, upcoming central clearing of Treasury repos, and regulatory limits on broker-dealer operations after 2008 make many observers worried about the vulnerability of the U.S. Treasury markets to fire sales and runs, American Banker reported.

*****

June 4, 2025:  As we delegate more decisions to our intelligent technology, rising risk becomes scattered throughout a system and harder to spot, said Mihaela Nistor, the Fed’s chief risk officer. We must incorporate human oversight at all levels, she said.

*****

June 5, 2025: The repurchase market is perpetually being transformed worldwide, and banks normally expected to quickly get cash to where it’s needed in a stumble are constrained by regulation in what they can do, said experts at an International Capital Market Association conference and reported by Finadium.

*****

June 9, 2025: Repos, which play “a crucial role” in financial markets, are undergoing “a profound digital transformation,” said a JP Morgan report. “The repo market is growing – more participants, more regulation, more complexity.” Traders want speed and instant visibility.

*****

June 10, 2025: Central banks, which once were simply Lenders of Last Resort for banks, have become Market Makers of Last Resort for all financial markets, and traders cleverly create lucrative products to take advantage of the central bank backstop. We need to move risk back into banking by requiring that all repo and derivative deals be backed by banks, money market funds and similar businesses have to be banks, shareholder are wiped out when banks fail, and other financial failures are managed by Congress, not the Fed, said scholar Carolyn Sissoko.

*****

June 10, 2025:  As of May 31, 1,003 money market funds held $2.9 trillion in repos, $2.7 trillion in Treasuries, $1 trillion in government agency securities, $322 billion in commercial paper, $203 billion in certificates of deposit, $163 billion in “other” investments and $144 billion in variable rate demand notes, Crane Data reported.

*****,

June 11, 2025:  The Bank of England wants lenders to borrow more readily from the bank’s new repo facility, to avoid cash shortages in the financial markets, Bloomberg reported.

*****

June 12, 2025: The Financial Stability Board reported that a lack of data is hindering regulators from effectively monitoring nonbank financial institutions (shadow banks). It’s studying the problem and will publish a report in July.

*****

June 13, 2025: Rehypothecation (reuse) of repo collateral contributes to instability in financial markets, said a policy analyst from the Bank of England.

*****

June 16, 2025:   An investment group has partnered with four international financial institutions to create triparty repo for Africa, the Securities Finance Times reported. “A mature repo market, like that which exists in most major economies, has been missing until now in Africa,” the group said.

*****

June 18, 2025: More than 50 bipartisan financial experts, including former Fed chairs Ben Bernanke and Janet Yellen, said that eliminating the Office of Financial Research and weakening the Financial Stability Oversight Council would have devastating effects for the financial system, the American Banker reported. These post-crisis organizations are key to monitoring the repurchase market.

*****

June 19, 2025:  Non-bank firms like real estate investment trusts (REITS), property funds and other mortgage lenders invested in commercial real estate are often borrowing heavily, borrowing short to lend long so vulnerable to runs, dangerously interconnected with banks and each other, and too opaque for regulators to monitor, said the Financial Stability Board.

*****

June 20, 2025: As the Fed sells securities it bought during crises, this raises risk in the financial markets, and primary dealers and banks need to be willing to use the Fed’s revived Standing Repo Facility to access cash when needed, said Fed official Roberto Perli.

*****

June 23, 2025: Uninsured nonbank stablecoins will be vulnerable to runs like the runs on repos, uninsured deposits, money market funds and other short-term financial claims throughout history, said Arthur E. Wilmarth, Jr., professor emeritus of law at George Washington University Law School. “Stablecoins would cause systemic financial crises and require massive government bailouts,” he said.

*****

June 24, 2025:  Since the financial crisis, more European buy-side firms like pension funds, insurers and large asset managers are moving from bilateral to centrally cleared repo to more reliably meet dramatically growing need for collateral and loans in derivative and other trades, said Eurex, a leading European derivatives exchange.

*****

June 24, 2025:  The Fed’s Treasury Market Practices Group issued best-practice recommendations for the Treasury repo market, to implement by June 2026, leading with charging fees, or haircuts, which many participants do not do. Controlling repo risk is imperative because the market is more than $8 trillion in daily average volume and very interconnected with other financial market participants, said Fed official Anna Nordstrom.

*****

June 24, 2025:  In its quarterly meeting, the Treasury Market Practices Group said their “best practice recommendations” for Treasury repo risk management is being well received, more outreach will be undertaken to encourage broader adoption, the Treasury repo market has been functioning smoothly, they expect those conditions to persist for most of the summer, and they wish more participants would use the Fed’s standing repo facility regularly.

*****

June 25, 2025: Lawmakers never remember the two things that can make financial crises disappear:  (1) Only banks, regulated and purposefully opaque, are allowed to deal in runnable short-term debt (deposits, repos, money market funds, stablecoins) and (2) making individual banks strong doesn’t make banking sound (e.g., requiring more bank capital sent banking into the shadows, where there’s no FDIC safety net), said  Gary Gorton from Yale and Jeffrey Zhang from the University of Michigan.

*****

June 26, 2025:  Speakers at an industry conference were “tactfully noncommittal” about the recent proposal by the Fed’s Treasury Market Practices Group that lenders in non-cleared bilateral repo transactions apply a fee, or “haircut,” to help avoid financial panics, Risk.net reported. The recommendation was seen as hard to implement, Risk.net said.

*****

June 27, 2025:  Because repos are the main funding source for Treasuries, and the Treasury market is the most important safe asset in the world, the political brinkmanship around the federal debt ceiling causes repo cost and volume to fluctuate wildly and adversely affects the stability of the worldwide financial system, said an International Monetary Fund working paper.

*****

June 29, 2025:  Before 2008, most lending was done domestically by banks to businesses. Now it’s mostly done globally by nonbanks to governments, facilitated mainly by banks and collateralized transactions like repo and FX swaps, said the Bank for International Settlements annual economic report. This has “made it easier for financial conditions to spread across borders” and poses “significant new challenges for financial stability,” the report said.

*****

June 30, 2025: Banks borrowed more than $11 billion from the Fed’s standing repo facility yesterday, the most since the facility was activated in 2021, probably to help banks tidy up their finances at quarter-end, Morningstar reported.

*****

July 2025:   When the Fed makes repo loans to primary dealers, the dealers usually on-lend to other companies. But in times of stress like the COVID crisis, primary dealers mainly lend to themselves, to affiliated firms. That’s still helpful, since these are large firms vital to market stability, but the Fed may not be helping other parts of the financial system, said a Fed report.

*****

July 1, 2025: Central counterparties and their clients have enough resources to meet clearinghouse demands for more cash and collateral during a financial crisis, even if demands from multiple clearinghouses reach 32% of the average client’s liquid resources, said the Office of Financial Research, based on a review of 11 major clearinghouses and six large clients. Continued monitoring is important, the report said.

*****

July 1, 2025:  As the U.S. Treasury prepares to start selling Treasuries to finance federal operations once the debt ceiling is lifted, unease in financial markets has begun showing up in key repo operations including the Secured Overnight Financing Rate, sponsored repo, the Fed’s standing repo facility and its reverse repo facility, said Bloomberg.

*****

July 4, 2025: Potential runs on stablecoins could spread to traditional financial markets and force the Fed to intervene, raising concerns about the Genius Act recently passed by the U.S. Senate, said Barry Eichengreen, professor of economics at the University of California, Berkeley, Central Banking reported.

*****

July 7, 2025:  Central Counterparties are critical to protecting financial markets from dangers like runs on repo, cyber attacks, digitalisation, non-bank financial intermediation and geo-economic fragmentation, said an executive at De Nederlandsche Bank.

*****

July 7, 2025:  Delays in implementing the final Basel III capital rules by the United States, the United Kingdom and the European Union prompted a senior Japanese regulator to chide laggards for failing to keep their word, Risk.net reported.

*****

July 9, 2025: The Bank of England warned that financial stability risks from leveraged hedge funds are growing, Bloomberg reported. It said a “small number” of hedge funds account for 90% of a record $105 billion in repo loans, and if they suddenly had to exit that could cause fire sales that could destabilize financial markets.

*****

July 9, 2025:  Lack of data hinders authorities’ efforts to understand nonbank dangers, reported the Financial Stability Board, which has set up a task force to study the issue, especially in two growing and risky areas:  heavily leveraged trading, often relying on repos, and opaque private credit.

*****

July 9, 2025:  Nonbank borrowing, both on- and off-balance-sheet including repos, has grown dramatically and is creating vulnerabilities and risks that can cause financial crises, the Financial Stability Board said. Regulators should consider implementing board recommendations, the Financial Stability Board said.

*****

July 9, 2025: The Financial Stability Board published nine recommendations in its final report for safely managing leverage at nonbanks, to avoid financial-market turmoil like occurred in the March 2020 pandemic crisis, the default of Archegos in March 2021, the commodities market turmoil in 2022, and the LDI pension crisis in the UK in September 2022. The recommendations were “watered down” from their first release in December, Bloomberg reported.

*****

July 9, 2025:   The third quarter will be the next “critical” test of the repo market, where a flight to safety has money market funds now accounting for 92% of the investments in the fed’s Reverse Repo Facility, potentially echoing the 2019 repo crisis, said AInvest advisor Theodore Quinn.

*****

July 10, 2925:  Money market funds’s rising repo holdings reached $3.1 trillion in June or 41.3% of all holdings, reported Crane Data.

*****

July 10, 2025: Since the financial crisis, banks have become stronger, nonbanks have flourished and the two have become deeply interconnected, exposing both to a “wide variety of risks” like margin calls and fire sales that can have “severe repercussions for financial stability,” said a Basel Committee on Banking Supervision report. Much better data is needed to monitor these links, the report said.

*****

July 11, 2025: Stablecoin links to traditional financial markets including repos are growing, causing worry they could spread instability and potential fire sales, as have repos, bank deposits and money market funds, said the Bank for International Settlements. Who will backstop stablecoins if they cannot meet their guarantees, especially since they’re borderless, the bank asked.  “History suggests that promises to pay are always tested and often fail.” Policies are needed.

*****

July 11, 2025: New calculations show the repo market was $11.9 trillion last year, counting unduplicated repo and reverse repo, up 70% since 2014, said Federal Reserve analysts. Much is transacted with primary dealers, not to finance their own inventories but as intermediary between money market funds (lenders) and hedge funds (borrowers) whose demand is driving the growth, analysts said.  Roughly 38% is bilateral and opaque.

*****

July 13, 2025:   Stablecoins are runnable short-term debt that can crash like repos and bank deposits do, triggering fire sales and financial market crises, so stablecoin companies need to be regulated like banks, said Andrew Bailey, governor of the Bank of England, as reported by Bloomberg.

*****

July 14, 2025:   As the U.S. sells a flood of Treasury bills to fund operations, money market funds are likely to take money out of the repo market, which is paying 4.31%, to buy T-bills at 4.353%, Reuters reported. Repos represent 37% of money market fund assets, Reuters said.

*****

July 14, 2025:  Australian banks are exploring how digital currencies and tokenization can bring greater efficiency, better cash flow and lower risk to the repurchase market, Securities Finance Times reported.

****

July 14, 2025: In recent years lightly regulated nonbanks have expanded dramatically, taking on roles banks traditionally held. Their traditional funding from banks has declined, but it has been partially replaced by off-balance-sheet credit lines, especially to broker-dealers, that could cause “significant” risk to financial markets if nonbanks suddenly had to draw on their lines, said a Federal Reserve study.

*****

July 14, 2025: Robust implementation of policies to stabilize nonbanks, deeper understanding of the opaque private finance industry, and better attention to the risks of using stablecoins in banking will be his priorities, said Andrew Bailey, the new chair of the Financial Stability Board.

*****

July 15, 2025: Much demand for repo loans today comes from hedge funds conducting Treasury cash-futures basis trades, which destabilized markets during the pandemic-era shock of March 2020, forcing a massive Fed bailout, but were “notably stable” during the market turbulence in April 2025 following the announcement of higher U.S. tariffs, said analysts from the Dallas Fed. The difference depends on whether primary dealers have funds to lend when needed, they said.

*****

July 16, 2025:  Regulations imposed after the 2008 financial crisis incentivized banks to move  their riskiest activities into the shadows, said a Liberty Street Economics report from the New York Fed.

*****

July 16, 2025:  It’s inevitable that financial crises will occur and central banks will have to intervene, said Nathanael Benjami, a Bank of England executive. We must take into account the dramatic increase of nonbanks since the global financial crisis, and the new Contingent Non-Bank Financial Institution Repo Facility is a “valuable addition” if markets stumble and the Bank of England has to intervene, he said.

*****

July 16, 2025: “The first lesson is to … avoid thinking ‘this time is different,’” said Fed governor Michael Barr, because history teaches that weakening regulations during a boom leads to a painful bust. “It is striking,” he said. Typically there’s “a heady confidence that market discipline would control risk-taking, that downside risks were so implausible as not to merit attention, and that easing regulation was justified ,,,,, A bit of humility would have helped.”

*****

July 16, 2025:  Cyber attacks are a growing threat to financial markets, which are a prime target and must prepare, said a European Securities and Markets Authority study. For example, an attack that interrupts a key transaction in the critical, and highly interconnected, repo market can have severe, widespread effects on 60-100 repo borrowers, the study said.

*****

July 17, 2025: Since the Great Financial Crisis, the Fed has implemented standing repo (lending) and reverse repo (borrowing) facilities to stabilize financial markets in risky times, explained The Teller Window at the New York Fed.

*****

July 22, 2025: Andrew Bailey, the governor of the Bank of England, said proposals to ease regulations imposed after the 2008 financial crisis could cause a repeat of that crisis, and he warned that the UK “cannot compromise” on financial stability,” CityAM reported.

*****

July 29, 2025:  Central clearing for Treasury cash and repo “offers significant benefits by reducing risks and increasing dealer balance sheet capacity through netting of repo across market segments,” said a Brookings Institution report by Nellie Liang and Haoxiang Zhu.

*****

August 2025:  The “significant” increase in central bank bailouts since 1945 is encouraging banks to take more risk, leading to more bailouts, and it’s worth asking if financial markets will outgrow central banks’ capacity to intervene, wrote New York University and University of Chicago economists. An alternative is for banks to buy private insurance, they said.

*****

August 8, 2025: The Consumer Financial Protection Bureau said it wants to “focus almost exclusively on supervising large banks while reducing supervision of nonbank competitors, some of which offer nearly identical products and services,” the American Banker reported. Oversight of nonbanks would be dramatically reduced.

*****

August 12, 2025:  Parallel financial markets are being created in the metaverse with little regulatory oversight, said researchers in the Journal of Credit Risk.

*****

August 12, 2025:  As systemic risk spreads internationally, no international institution has the authority to tell government authorities how they must adjust to reduce the risk, not even the International Monetary Fund, said Biagio Bossone in a Central Banking report.

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August 12, 2025: For the first time, a repo transaction was recently conducted instantly on a blockchain network, foreshadowing a market that one day will operate 24-7 without middlemen, Bloomberg reported. U.S. Treasuries were the collateral.

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August 12, 2025: The Office of Financial Research reported that new research shows 42% of repo transactions do not have the protection of haircuts, a lower number than previously thought “but still significant.” About half of these involve hedge funds where 65% of repo are unprotected, the report said.

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August 13, 2025: Six years after the New York Fed and Columbia University began holding an annual conference on cyber risk to financial stability, panelists said growing interconnectivity still “heightens systemic risk” from technologies like artificial intelligence and human oversight remains essential.

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August 14, 2025:  Only 30% of central banks carry out stress tests on nonbank financial institutions, while almost 96% do stress tests on banks, said Financial Stability Benchmarks 2025 as reported by Central Banking.

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August 18, 2025: UK repos that use gilt as collateral would be more stable if lenders had to assess a minimum charge (haircut) for the transactions, Nathanael Benjamin with the Bank of England told Central Banking. He said the bank worries that interest-free repos encourage build-up of  “extreme leverage,” Central Banking reported.

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August 19, 2025:  While the US is “unleashing prosperity through deregulation”, and the UK and EU have decided to delay tougher capital rules until 2027, some countries are going in the opposite direction, reported The Banker. They include India, Switzerland, Bangladesh and China, The Banker said.

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August 19, 2025:  The U.S. Treasury is asking for comment by October 17 on ways to safely use digital assets and to spot illicit activity involving them, Finadium reported.

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August 25, 2025:  The Fed should consider lifting limits on repo loans that the Fed’s standing repo facility can make in times of crisis, said Dallas Fed President Lorie K. Logan, who anticipates pressures could appear in September around the tax date and quarter end.

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August 27, 2025:   The Fed’s primary dealers will play an outside role in the coming central clearing of all Treasury repos, a potentially dangerous interconnectedness that the Fed’s standing repo facility may help stabilize, said a Chicago Fed Letter.

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August 28, 2025:  Shocks caused by increased interest rates in a dealer’s one specific repo collateral class can propagate to other collateral classes through the dealer, said an Office of Financial Research study.   “A sufficiently large funding shock might lead to financial instability in the form of impaired functioning of financial markets,” the study concluded.

*****

August 29, 2025:  As the Fed withdraws cash from financial markets with its Quantitative Tightening, traders, mainly money market funds, have withdrawn almost all their money from the Fed’s Overnight Reverse Repurchase Agreement Facility to get cash. Is another destabilizing cash crunch like September 2019 coming, asked Reuters and Morningstar. The new Standing Repo Facility, can help, Fed officials said.

*****

September 2025: Perhaps the biggest challenge bank regulators face is the discretion that accounting rules give banks over what to report in their financial statements, said a report by Federal Reserve and University of Virginia analysts. Discretion helps banks prevent panic-based runs, but achieving the best mix of discretion and regulation is “a complicated task,” they said.

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September 4, 2025:  Central clearing and minimum haircuts (fees) are two important ways to strengthen the gilt repo market, said a Bank of England discussion paper. “It is crucial to ensure that these markets are able to continue functioning during periods of stress and absorb, rather than amplify, shocks,” the paper said.

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September 4, 2025: Total Return Swaps, a derivative often substituted for a repurchase transaction, are “about double” what they were a year ago, said consulting firm Finadium.

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September 5, 2025: The growing number of insurance companies, pension plans and others that want to be shadow-bank lenders requires regulation, said analysts in Intelligent Risk magazine. “A growing fraction of corporate lending is now occurring outside the traditional banking system” and new oversight of “largely unregulated lenders” is needed, Finadium summarized.

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September 8, 2025: On tax day September 15 financial markets could run short of cash, causing some to worry about a potential repeat of the September 2019 repo crisis. Could we be facing a  Repocalypse, asked reporter Tracy Alloway at Bloomberg. Or maybe the Fed’s two repo facilities will ease the crunch. “Place your best now,” Alloway said.

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September 11, 2025:  Money market funds held a record $7.5 trillion in assets at the end of June, including a record $3 trillion in repos, a fourth of the estimated $12 trillion U.S. repo market, said the Office of Financial Research. Increasingly money market funds rely on just a few repo counterparties, the office said.

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September 11, 2025: Colombian banks rely on wholesale deposits and other short-term funding from investors to manage their cash needs. Thus, stress in non-bank funding markets can translate quickly into trouble at banks, said a policy brief by the European Money and Finance Forum.

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September 14, 2025:  Rich investors are once again lapping up structured products, almost 20 years after the complex instruments, a combination of bonds and derivatives, played a leading roll in the 2008 collapse, Bloomberg reported.

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September 15, 2025:  U.S. banks borrowed $1.5 billion from the Fed’s standing repo facility September 15, a modest draw at a time when some analysts worried that banks could face an unsettling shortage of cash, Reuters reported

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September 17, 2025: The Fed’s standing repo facility, which provides cash to traders, faces its first real test at the end of September when traders make quarter-end adjustments that can destabilize financial markets, Reuters reported.

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September 17, 2025:  In recent years, the complex blurring and linking of banks and non-banks requires better understanding and new regulation on a global level to control systemic risk across the financial system, wrote Patrick Montagner, a European Central Bank official, in Eurofi Magazine

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September 17, 2025:  Voluntary central clearing for repo transactions has benefits, but mandatory central clearing “increases the likelihood of short-term liquidity disruptions,” wrote Josh Galper at Finadium.

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September 18, 2025: Why have central banks in the past century had to keep bailing out financial markets, ask economists Viral V. Acharya, Raghuram Rajan and Zhi Quan (Bill) Shu. An option is private insurance, as used long ago, but now banks know central banks will ride to their rescue for free, so they increase risk with repos and derivatives and crises continue, the study says.

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September 19, 2022:  The European Securities and Markets Authority explored how cyber risks can disrupt the repo market causing “severe liquidity shortages,” the European BankiAuthority reported.

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September 19, 2025: U.S. and European trade associations said recent proposals from regulators to stabilize securities finance including repos by requiring margin/haircuts (fees) are faulty in several ways and other approaches would be more effective.

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September 22, 2025:  Central counterparties forced traders to come up with record levels of additional collateral (margin calls) in the second quarter of 2025, exceeding the previous record set at the beginning of the Covid-19 pandemic mainly because of tariff uncertainties, reported Risk.net.

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September 22, 2025:  In today’s heightened instability of financial markets, central banks must be prepared to intervene, said Piero Cipollone, a board member of the European Central Bank.

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September 22, 2025: In an era of rapid transformation and growing interconnectedness for financial markets, age-old risks still threaten and “astute supervision and regulation” is critical, European Central Bank president Christine Lagarde told an annual research conference. “This time is never different,” she said.

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September 26, 2025:   China’s central bank announced it is opening its onshore repo market to some foreign investors, “a new landmark move of financial market opening-up,” reported China Daily.

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October 1, 2025: Bank lending to shadow banks is soaring, and it’s likely no one knows whether the risk gets transferred or stays with the bank, said Financial Times columnist Robert Armstrong. “Shadow banks are not outside the banking system, and that is a worry,” said the headline.

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October 3, 2025:  Banks are increasingly using “synthetic risk transfers” to transfer credit risk to investors, especially hedge funds, which increasingly get repo loans to help finance the deal. This has benefits, but it also creates the potential for “significant vulnerabilities” and “risk to financial stability,” said an International Monetary Fund report.

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October 3, 2025:  Two big changes make today’s financial markets very different from 2008, (1) the massive growth in non-bank financial institutions with close bank interconnectedness and (2) “signs of regulatory fatigue with much lighter regulation for non-banks, said European Central Bank president Christine Lagarde.  We must tighten non-bank regulations to bank levels to prevent a repeat of 2008, she said.

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October 6, 2025: The deregulatory push under President Trump is “planting the seeds” of the next financial crisis, threatening a systemic shock on the scale of 2008, said Michael Hsu, former acting head of the Office of the Comptroller of the Currency, The Banker reported.

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October 8, 2025:  Recent proposed rollbacks in capital standards and in the rigor of stress testing for the largest banks threaten to leave community banks exposed to large-bank crises as in 2008, said Federal Reserve Governor Michael Barr.

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October 8, 2025:   One of the best books on financial crises is Misunderstanding Financial Crises: Why We Don’t See Them Coming by Gary Gorton (Oxford University Press, 2012), which describes the 2008 crisis in the US as a run on repo, prime broker balances, and asset-backed commercial paper, said Andrew Bailey, governor of the Bank of England.

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October 8, 2025: With the SEC mandate that all Treasury repo (repo with Treasuries as collateral) be centrally cleared by June 2027, traders are increasing interested in sponsored repo, where mainly money market funds and hedge fund lend and borrow respectively through dealers, who “sponsor” the traders with the central clearing party.   More study is needed on this new market, said a New York Fed report. This hot topic is also discussed in Euronext, Acuiti Report, and Traders Magazine.

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October 13, 2025: “Vulnerabilities in the financial system remain high” and in an interconnected global financial system lagging nations must fully implement agreed-upon reforms, said Andrew Bailey, chair of the Financial Stability Board, who is especially concerned “that the impetus to implement reforms may be weakening.”

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October 14, 2025: Banks are significantly increasing their lending to opaque and lightly regulated hedge funds, private equity and private credit funds, because they produce higher returns than traditional commercial and industrial lending, and policymakers should strengthen their oversight, said the International Monetary Fund.

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October 15, 2025:  Banks borrowed more from the Fed’s standing repo facility this week than at any time since the COVID-19 pandemic (excluding end-of-quarter periods), suggesting access to cash in the financial markets is getting tight, Reuters reported.

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October 15, 2025:  Both the International Monetary Fund and Christine Lagarde, who heads the European Central Bank, are warning about the dangers of the increasing interconnection between banks and shadow banks, reported The Banker.

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October 15, 2025:   Hedge funds based in the Cayman Islands have massively increased their purchase of U.S. Treasury securities financed by repo loans to fund their basis trades, said a FEDS Note report.

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October 16, 2025:  In 10 years gross assets at hedge funds have doubled, plus they have significantly increased their repo borrowing, which can “pose or amplify risks to financial stability” given their “significant interconnections” with the world’s largest banks, as happened in 1998 and 2020, said a New York Fed study.

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October 16, 2025:  Securities financing transactions like repo were up 10% in the year ended June 30 for 31 major European banks, reaching record highs at 14 institutions, reported Risk.net.

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October 16, 2025:  The recent failure of two U.S. automotive firms that relied on private credit companies for financing is a reminder that regulators need to keep a close eye on risks that may be building in non-bank financial institutions, said International Monetary Fund managing director Kristalina Georgieva, reported by Reuters.

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October 18, 2025: “The repo market, the Treasury market and the FX market together make up the operating system of global finance,” said the co-CEO of the Kraken crypto exchange. Every few years it breaks and has to be bailed out by mainly by the Fed and J.P. Morgan. But as it moves to blockchain, risk will be distributed and visible and money will automatically flow instantly to where it’s needed, he said.

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October 20, 2025: The European Systemic Risk Board said significant risks are rising as financial institutions and stablecoins become increasing entwined, highlighting an “urgent need to introduce safeguards against financial stability risks.”

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October 20, 2025:  The standing repo facility is working as intended, letting banks borrow overnight as needed to calm financial market “brushfires,” wrote blogger Wolf Richter. This is not a bailout, he said.

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October 21, 2025: “Alarm bells” are ringing, said Bank of England chief Andrew Bailey, because of the recent collapse of U.S. firms First Brands and Tricolor, which were heavily financed by private credit, an opaque market that regulators fear may be dangerously overextended.

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October 24, 2025: Analysts at Jefferies investment bank said there is “some evidence of liquidity stresses in the U.S. money markets,” especially the growing borrowing from the Fed’s Standing Repo Facility which the bank said should be reviewed as last resort borrowing, StreetInsider.com reported.

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October 25, 2025:  Growth in lending by private firms like hedge funds, and their “slicing and dicing” of loan structures “similar to those that precipitated the 2008 financial crisis,” worries Andrew Bailey, chief of the Bank of England, who said a lack of transparency means he doesn’t know how much mainstream banks are exposed and how worried he should be, The Observer reported.

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October 27, 2025:  The CEO of Goldman Sachs does not believe the collapse of U.S. firms First Brands Group and Tricolor Holdings would trigger any systemic risk in the credit markets, Bloomberg reported.

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October 27, 2025:  The 2002-2022 period of low interest rates has triggered a “profound structural transformation” in the life insurance industry, with a shift to riskier and opaque assets and derivatives, greater interconnectedness with nonbanks, and increased short-term funding like repos, said a study by the Bank for International Settlements. “Vigilant regulation” is needed, the analysts said.

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October 28, 2025: Stablecoins are “substantial” cash lenders in the repo market, and drawdowns as happened n 2021 “could lead to large price shocks and funding issues as stablecoin issuers have to fire-sell inventories,” said a TD Securities report. These problems will decline, the report said.

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October 31, 2025:  After some signs of disinterest, financial institutions suddenly borrowed a record amount from the Fed’s Standing Repo Facility today, using the facility exactly as it is intended, to provide cash when markets see a shortage which is common at a month’s end, Reuters reported.

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November 2025:  European repo jumped 11.9 percent in the year ended June 11, to a record $6,891 billion, according to the International Capital Market Association.

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November:   So many changes are affecting the financial markets that “it’s like 2025 decided to throw the last three years into a blender, hit “puree,” and ask us to consume it all at once,”  said the Financial Markets Group at the Federal Reserve Bank of Chicago. They included the U.S. Treasury clearing mandate, tokenism, stablecoins, crypto-assets and “unprecedented volatility.”

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November 3, 2025:  For unknown reasons, fast-growing crypto exchange-traded funds were among the largest borrowers and lenders of US Treasury repos in the second quarter of this year, Risk.net reported. The trades link the funds to the traditional banking industry, raising questions about market risk.

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November 7, 2025: “Maybe some repo ructions could be a good thing?” asks Robin Wigglesworth with FT Alphaville. Maybe it’s time to remind the finance industry that “the world can occasionally be a cruel and unforgiving place” so it will behave and not cause “a lot more violent mayhem in the future,” he said.

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November 7, 2025:  Except for increased leverage at hedge funds and life insurers, with heightened exposure to runnables like repo, financial system vulnerabilities remain modest, according to the Federal Reserve’s twice-a-year Financial Stability Report.

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November 10, 2025: “The Standing Repo Facility is working exactly as designed,” New York Fed president John Williams told the Financial Times, according to New York Fed report.

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November 12, 2025:  Qualified companies that need cash should borrow from the Fed’s Standing Repo Facility, it can withstand a surge, said Roberto Perli, a top Fed executive.

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November 13, 2025: Repo market participants are saying that liquidity, or available financing, is their main concern at 2025 end, and “December could be rocky,” wrote Finadium editor Josh Galper.

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November 13, 2025: Changes in the repo market that uses UK bonds (gilts) as collateral need to be studied, said a Bank of England director. These include more non-bank traders like hedge funds, electronic high-frequency trading, and free or low-cost repos for more than half of the transactions which allows a “substantial” build-up in borrowing, the Securities Finance Times reported.

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November 14, 2025:  Firms have launched the first fully electronic trading market for repos in Mexico, the Securities Finance Times reported. Mexico is the first Latin American country to take this step, which aims to bring Mexican repo operations to the level of Europe and U.S. markets.

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November 15, 2025:  Cash in the financial markets is getting scarcer and New York Fed president John Williams, wondering why more firms aren’t borrowing from the Fed’s Standing Repo Facility that it created to “act as a shock absorber,” met with Wall Street banks to discuss it, Reuters reported.

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November 18, 2025:  Banks, through their bank holding companies, have “profoundly” expanded into non-bank sectors over the last several decades, and this raises “important questions about the nature of banks themselves,” said Liberty Street Economics.

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November 19, 2025: Dealers told Fed officials that they are reluctant to borrow from the Fed’s Standing Repo Facility because it “carries a stigma and could be seen as a sign of trouble” and some structural issues make it hard to access, “complicating the central bank’s efforts to ease strains in the market for repurchase agreements,” Bloomberg reported. Ways to make the facility more attractive are being considered.   Barron’s published a similar report.

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November 19, 2025:   The close interconnection of the growing non-bank financial sector and banking requires that regulators focus on how these changes affect the resilience of the financial system, Financial Stability Board chair Andrew Bailey told the Basel Committee on Banking Supervision, the Finadium editorial team reported.

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November 19, 2025:  Work is still needed on stabilizing repo-market links to government bonds, strengthening non-bank financial institutions, overseeing non-bank financial institution borrowing and filling gaps in data related to leveraged trading in sovereign bond markets, said the Financial Stability Board.

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November 19, 2025:  The cost of borrowing in the repurchase market is “stubbornly high” and could stay that way through the end of the year, reflecting a shortage of cash and “adding another layer of stress to already fragile financial markets,” Reuters reported.

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November 19, 2025: “U.S. repo markets are among the largest and most liquid short-term funding markets in the world, with $12.6 trillion average daily outstanding positions in Q3 2025,” much larger than previously known, reported the Office of Financial Research in its 2025 annual report. The impact of disruptions would be limited by loans available from the Fed’s Standing Repo Facility, the office said.

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November 20, 2025:   One of the main focal points for the Financial Stability Board’s work next year  will be the growth of non-bank financial institutions, especially private credit markets and stablecoins, and their close interconnectedness with the banking system, said Financial Stability Board CEO Andrew Bailey. These represent “fundamental changes in finance,” he said. Reuters also reported.

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November 20, 2025:  Among the issues she’s watching is the growing role of hedge funds as investors in the U.S. Treasury market, said Federal Reserve governor Lisa D. Cook, chair of the board’s Committee on Financial Stability.  Often the funds borrow heavily on the short-term repurchase market to amplify returns, exposing them to “significant funding risks” that could destabilize financial markets, she said.

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November 24, 2025:   Some banks are reluctant to use the Fed’s standing repo facility, which the Fed created to give firms a place to borrow cash when needed, to steady wobbling markets, the Wall Street Journal reported.  Fed officials said they’re willing to make changes to make the facility more effective.

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November 25, 2025:  Key sectors of the U.S. financial system are “sound and resilient,” but borrowing at hedge funds and life insurers is “elevated relative to historical standards” and thus “the overall level of vulnerability due to financial-sector leverage was notable,” the Fed said in its second-quarter 2025 Financial Stability Report.

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November 25, 2025:  The Fed’s standing repo facility has not been effective in controlling volatility in financial markets because banks and primary dealers are reluctant to borrow, fearing stigma, said most participants in a symposium co-hosted by the Bank Policy Institute and Morgan Stanley.

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November 27: 2025: The exposure to repo of rapidly growing, risky areas of the financial markets — for example hedge funds that use free repo loans to speculate and major banks that finance both repo loans and FX (foreign exchange) swaps — creates an interconnection of banks and non-banks vulnerable to crises, said a Bank for International Settlements official.

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December 2, 2025:  The largest hedge funds can get repo loans for very low or zero costs, probably because they have market power with lenders, and that can be troubling because it can lead to infinite borrowing and potentially serious financial stress in times of market turmoil, said a study for the Bank for International Settlements.

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December 2, 2026:  As traders prepare to meet new SEC requirements that repo transactions with U.S. Treasuries as collateral be centrally cleared by June 2027, the SEC has approved a second central clearing party, Bloomberg reported.

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December 4, 2025:  For the first time, officials have a pretty good idea of what’s going on in the repurchase market, “marking a significant advancement in financial market transparency,” said the Office of Financial Research.   Thanks to new data the office collected, analysts report the U.S. repo market averaged about $12.6 trillion a day in the third quarter, much more than previously known, with $5 trillion in the previously opaque non-centrally cleared bilateral market and with 69.4% collateralized by U.S. Treasuries, analysts said.

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December 4: 2025:  At the end of November traders stepped up their borrowing from the Fed’s Standing Repo Facility to $24 billion, the second month in a row that saw a surge, reported econreporter and the New York Fed. The facility was activated in 2021 to ensure cash is always available during stress events.

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December 8, 2025: Hedge funds are growing rapidly, mainly relying on repo borrowing to finance their bond holdings as they especially focus on the cash-futures basis trade and the interest rate swap spread trade (“the swap trade”), reported the Bank for International Settlements in their quarterly review.

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December 9, 2025: The Fed’s sudden return to buying securities to get money in the hands of lenders, who use it for highly profitable transactions like repo for financing lending, trading and derivatives, are helping financial markets, not households, businesses and the real economy, said  a director with Better Markets. The American people deserve to know this truth, the director said.

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December 9, 2025:  The Bank of England reported that its annual stress test of the UK’s three central counterparties to transactions like repo found they all “have adequate pre-funded resources to cover a severe stress scenario,” the bank reported.

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December 11, 2025:  The Federal Reserve and the Bank of England are both taking steps to calm financial markets during the year end when annual bookkeeping changes on top of both central banks’ recent withdrawal of funds from banks could cause a shortage of cash in the repo market and panic, according to multiple reports from the New York Fed, Bloomberg here, here and here, Reuters here and here, and Finadium here and here.

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December 11, 2025: Repo traded by a third party, so-called tri-party repo, was up 23 percent year-over-year in July, Finadium reported. It’s valued for its “reliability, scalability and access to liquid pools of collateral assets,” but it could improve, Finadium found in a survey.

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December 15, 2025:  When repo rates rise, as happened in recent months, the Fed’s standing repo operation can “act as a shock absorber” by lending cash to market participants, said New York Fed CEO John Williams. “I fully expect that standing repo operations will continue to be actively used in this way,” he said.

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December 15, 2025: Overnight repo rates rose again today, possibly signaling that the Fed’s recent launch of quantitative easing less than two weeks after ending it is not yet calming market anxieties, reported MarketWatch.

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December 16, 2025: Global financial markets face “mounting pressure” from a $63 trillion shadow banking sector that is lightly regulated, reliant on short-term funding like repos to make long-term investments and extensively linked to the traditional banking sector, “creating systemic vulnerabilities across financial markets,” said investment advisor Discovery Alert.

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December 16, 2025: Seeing that its Standing Repo Facility was not serving as a reliable source of cash for repo traders as hoped, last week the Fed restarted quantitative easing less than two weeks after ending quantitative tightening, and the Fed relaxed some rules and procedures for the repo facility and renamed it “standing repo operations” in hopes of reducing stigma and encouraging its use as the Fed’s main mechanism for preventing financial market strain, Bloomberg reported.

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December 16, 2025:  Lightly regulated non-bank groups grew 9.4% to $256.8 trillion in 2024, reaching more than half of global financial assets, compared to a 4.7% rise to just over $191 trillion for banks, reported the Financial Stability Board and covered by the Financial Times. Investment funds, trust companies, hedge funds and money market funds grew significantly. Supervisors warned of potential systemic risk created by non-bank opacity and links to traditional banking.

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December 17, 2025: A new round of quantitative easing, now being called “reserve management purchases,” appears to be calming the Treasury repo markets which often exhibit anxiety at year end, Reuters reported.

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December 17, 2025: The smooth functioning of repo markets is critical to maintaining a robust Treasury market, said speakers at the annual U.S. Treasury Market Conference for key federal regulators, market participants, academics and others. “Stable, efficient, and well-functioning repo markets are in everyone’s best interest and vital for ensuring rate control,” said New York Fed official Roberto Perli, reported by the Fed’s Teller Window.

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December 18, 2025:  At the Fed’s recent Open Market Committee meeting, it launched Quantitative Easing again “and there’s reason to believe …. it will continue indefinitely,” said Wall Street Journal columnist Joseph C. Sternberg.  The Fed has to ease up on fighting inflation so it can prevent turmoil in overnight bank lending like repos.

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December 18, 2025:  Central banks may do large-scale purchases of securities or lending when financial markets appear unstable, such as the Fed’s Quantitative Easing. This strategy has proven effective but it comes with costs, said a Bank of Canada report. It may limit bond availability, distort asset prices, increase moral hazard, and more, the report said.

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December 22, 2025:   Money continues to pour into money market funds, who increasingly use it to make repo loans, said a J.P. Morgan study reported by Crane Data. The study expects markets to become more volatile in 2026. “Standing Repo Facility efficacy is critical, and in the absence of that, we must consider what else the Fed could do to stabilize the funding markets,” the study said.

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December 22, 2025:  Traders like what they see for the stock market next year, in part because of the Fed’s new program to inject $40 billion a month into the repo market to keep it running smoothly, Fortune reported.

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December 23, 2025:  Key tools that the Fed uses to keep interest rates within its preferred range are its Overnight Reverse Repo (selling securities) and Standing Repo (buying securities) operations, which set low and high rates respectively, reported the Fed’s Teller Window publication. To ensure its effectiveness, the Fed recently eliminated the $500 billion daily limit on Standing Repo, the Teller Window said.

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December 29, 2025: One in five banks, including large banks, only protect themselves in advance for a maximum of 30 days of emergency cash needs, reported Risk.net. “The variation in resilience horizons is stark,” Risk.net wrote.

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December 31, 2025:  The Fed’s Standing Repo Facility, redesigned several times to make it more attractive to traders, appears to have done its job at year-end, provide cash when needed to calm nervous financial markets, Reuters reported here and here. On Dec. 31 firms, mainly banks, drew out a record $74.6 billion in repo loans collateralized with $31.5 billion in Treasury bonds and $43.1 billion in mortgage-backed securities. Also helpful was the Fed’s renewal of Quantitative Easing on Dec. 1 and the Fed’s repo borrowing facility which took in $106 billion, mainly from money market funds, Reuters and the Fed reported.

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