New York Fed Announces 13 Additional Reverse-Repo Counterparties

The Federal Reserve Bank of New York expanded its counterparties in reverse-repurchase agreements for use when policy makers eventually drain the record amount of cash they added to the financial system.

The Fed added 13 additional banks, government-sponsored enterprises, such as the Federal Home Loan Bank of Boston, and money funds to its list of approved reverse-repo counterparties. The New York Fed posted the firms added on its website today.

The central bank began in 2010 expanding counterparties beyond its primary dealers in a plan to increase its future capacity and ability to withdraw the unprecedented amount of liquidity it has added to the financial system since global financial crisis in 2008.

In a reverse repo, the Fed lends securities for a set period, draining cash from the banking system. At maturity, the securities are returned to the Fed, and the cash to the primary dealers. In a tri-party repo, a clearing bank acts as a third party to make sure there’s adequate collateral behind the repo and that it conforms throughout the life of the transaction to the investor’s requirements.

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: David Liedtka at dliedtka@bloomberg.net

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