The Federal Reserve Bank of New York has emerged as the largest participant in an important segment of the short-term lending market that was at the epicentre of the financial crisis.
The Fed’s decision to quadruple its trading with government money market funds in the repurchase or “repo market” is a sign that the central bank is now engaging more directly with the shadow banking system at the expense of large Wall Street banks. Historically, the repo market was where big banks pawned out their securities such as Treasury bonds to lenders including money market funds, insurers and mutual funds, in exchange for short-term financing. Now the Fed is stepping in to trade as well as it prepares as it prepares to end its current near-zero interest rate policy.
Armed with a balance sheet of $4.3tn of bonds purchased during quantitative easing, the Fed is using what it calls its reverse repo programme, or RRP, to trade with money funds at a time when tough new regulatory standards have made such borrowing less attractive for the banks.
Rather than lending to the banks, money market funds have sharply boosted their dealings with the US central bank.
Between September 2013 and the end of May, government money market funds increased their use of repo trades with the New York Fed by $65bn to a total of $87bn, while decreasing their repo holdings with dealer-banks by $38bn, according to a study by Fitch Ratings. The growing presence of the Fed in repo is a signal that it is testing new ways to control short-term interest rates once it starts tightening monetary policy. When official short-term rates are eventually pushed higher, the Fed plans to use the RRP, to drain cash from the financial system via short-term loans of Treasuries from its massive balance sheet.
Robert Grossman, managing director at Fitch, said the change in the Fed’s presence in the repo market has been dramatic and that the central bank could use RRP to significantly escalate its role.
Fitch said the relationship between banks and government money market funds has changed since the Fed launched the RRP. The likes of Citigroup, Bank of America, Crédit Agricole, Goldman Sachs and RBC now rely less on money market funds for funding while BNP Paribas, Deutsche and Barclays were the banks most reliant on repo funding, as of May 31.
纽约联邦储备银行(Federal Reserve Bank of New York)已成为短期贷款市场一个重要领域的最大参与者。该领域曾处于金融危机的震中。
惠誉表示，自美联储推出RRP以来，银行与政府货币市场基金的关系已经改变。花旗集团(Citigroup)、美国银行(Bank of America)、法国农业信贷银行(Crédit Agricole)、高盛(Goldman Sachs)和加拿大皇家银行(RBC)之类的银行现在更少依靠货币市场基金获取融资，而截至5月31日，法国巴黎银行(BNP Paribas)、德意志银行(Deutsche)和巴克莱(Barclays)是最依赖回购融资的银行。