The Euro Interbank Repo Market

42 Pages Posted: 28 Sep 2013 Last revised: 29 Mar 2016

See all articles by Loriano Mancini

Loriano Mancini

USI Lugano - Institute of Finance; Swiss Finance Institute

Angelo Ranaldo

University of St. Gallen; University of St. Gallen - School of Finance

Jan Wrampelmeyer

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: July 30, 2015

Abstract

The search for a market design that ensures stable bank funding is at the top of regulators' policy agenda. This paper empirically shows that the central counterparty (CCP)-based euro interbank repo market features this stability. Using a unique and comprehensive data set, we show that the market is resilient during crisis episodes and may even act as a shock absorber, in the sense that repo lending increases with risk, while spreads, maturities, and haircuts remain stable. Our comparison across different repo markets shows that anonymous CCP-based trading, safe collateral, and the absence of an unwind mechanism are the key characteristics to ensure market resilience.

The internet appendix for this paper is available at the following URL: http://ssrn.com/abstract=2368158

Keywords: Repurchase agreements, money market structure, central counterparty, short-term debt, financial crisis, unconventional monetary policy

JEL Classification: E43, E58, G01, G12, G21, G28

Suggested Citation

Mancini, Loriano and Ranaldo, Angelo and Wrampelmeyer, Jan, The Euro Interbank Repo Market (July 30, 2015). Swiss Finance Institute Research Paper No. 13-71; University of St. Gallen, School of Finance Research Paper No. 2013/16. Available at SSRN: https://ssrn.com/abstract=2331355 or http://dx.doi.org/10.2139/ssrn.2331355

Loriano Mancini

USI Lugano - Institute of Finance ( email )

Via Giuseppe Buffi 6
6904 Lugano, CH-6904
Switzerland
+41 (0)91 912 46 47 (Fax)

HOME PAGE: http://www.people.usi.ch/mancil/

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Angelo Ranaldo

University of St. Gallen ( email )

Swiss Institute of Banking and Finance s/bf-HSG
Unterer Graben 21
St. Gallen, 9000
Switzerland
+41712247010 (Phone)

HOME PAGE: http://www.sbf.unisg.ch/Lehrstuehle/Lehrstuhl_Ranaldo/Homepage_Ranaldo.aspx

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Jan Wrampelmeyer (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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