Regulatory Arbitrage in Repo Markets

65 Pages Posted: 3 Nov 2015 Last revised: 22 Aug 2017

Date Written: June 1, 2017


Non-U.S. banks with relatively low capital ratios appear to temporarily remove an average of $170 billion from the U.S. market for tri-party repurchase agreements (repo) before each quarter-end in order to appear safer and less levered. This amount is more than double the $76 billion market-wide drop in tri-party repo during the turmoil of the 2008 financial crisis and represents about 10% of the entire tri-party repo market. Such window dressing-induced deleveraging spills over into agency bond markets and money market funds and affects market liquidity each quarter.

Suggested Citation

Munyan, Benjamin K., Regulatory Arbitrage in Repo Markets (June 1, 2017). Office of Financial Research Working Paper No. 15-22, Available at SSRN: or

Benjamin K. Munyan (Contact Author)

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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