Repo Firepower Reduced by Falling Cash Levels at Big U.S. Banks
- Liquid assets held as cash have fallen to 31% at largest banks
- Biggest lenders, hampered by constraints, are slow to jump in
An American flag is reflected in the window of a building near the New York Stock Exchange in New York.
Photographer: John Taggart/BloombergThis article is for subscribers only.
Even as hedge funds and smaller broker-dealers lean more heavily on the biggest U.S. banks for borrowing in repo markets, the lenders’ cash holdings have been declining, reducing their ability to jump in and relieve pressure when rates spike.
The average portion of liquid assets held as cash by the six biggest lenders fell to 31% by the end of September, down from more than 40% in the previous two years. The portion of Treasuries and other securities considered easy to sell under international regulations, meanwhile, rose.