FOMC Releases Statement on Repurchase Agreements

Posted on 07/28/2021


The Federal Open Market Committee (FOMC) announced the establishment of a domestic standing repurchase agreement (repo) facility (SRF) and a repo facility for foreign and international monetary authorities (FIMA repo facility). These facilities will serve as backstops in money markets to support the effective implementation of monetary policy and smooth market functioning.

According to the July 28, 2021 statement,”Standing Repo Facility

Under the SRF, the FOMC directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to conduct overnight repo operations with a minimum bid rate of 0.25 percent and with an aggregate operation limit of $500 billion, effective July 29, 2021. As with the Desk’s existing repo operations, the SRF will be cleared and settled on the tri-party repo platform. Treasury, agency debt, and agency mortgage-backed securities will continue to be accepted. All other terms will be the same as the existing overnight repo operations.

Primary dealers will continue to be counterparties for repo operations under the SRF. The SRF counterparties will be expanded to include additional depository institutions. Initially, criteria will be established to effectively manage onboarding of interested depository institutions. Consistent with the New York Fed’s commitment to ensuring its counterparty policies promote a fair and competitive marketplace, these criteria will be adjusted over time to expand depository institution eligibility. The initial criteria will allow depository institutions with holdings of Treasury, agency debt, and agency mortgage-backed securities greater than $5 billion as of June 30, 2021 or with total assets greater than $30 billion to express interest starting on October 1, 2021. All counterparties must be able to transact on the tri-party repo platform.

Additional information on the SRF can be found at the Repo and Reverse Repo Agreements page or in Frequently Asked Questions.

FIMA Repo Facility

Under the FIMA repo facility, the FOMC directed the Desk to offer overnight repo transactions at a rate of 0.25 percent to foreign central bank and international accounts against their holdings of Treasury securities maintained in custody at the New York Fed, subject to a per-counterparty limit of $60 billion. Eligible counterparties are foreign official institutions with custody accounts at the New York Fed that have been approved by the Foreign Currency Subcommittee of the FOMC.”

The New York Fed provides a limited set of investment services to foreign official institutions, primarily to aid with their funds and liquidity management. The two primary service offerings are a pooled foreign overnight reverse repurchase agreement (the foreign repo pool), and the purchase or sale of U.S. government securities. In addition, the New York Fed operates a standing repurchase agreement facility for foreign and international monetary authorities (FIMA Repo Facility).

The foreign repo pool is a short-term U.S. dollar money-market investment that also supports account holders’ daily cash management needs related to the settlement of payments and securities transactions. Account holders that opt to participate in the foreign repo pool instruct the New York Fed to invest certain end-of-day cash balances in an overnight repurchase agreement under which securities are purchased from the Federal Reserve’s System Open Market Account (SOMA). At maturity, on the following business day, the securities are repurchased by the SOMA at a repurchase price that includes a return calculated at a rate generally equivalent to the New York Fed’s overnight reverse repurchase operations (ON RRP), although the New York Fed may vary the rate of return at any time without prior notice.

The New York Fed has been authorized by the Federal Open Market Committee (FOMC) to provide the foreign repo pool since the mid-1970s. The foreign repo pool impacts the Federal Reserve’s balance sheet. As account holders’ demand for foreign repo pool investments increases or declines, the composition of the Federal Reserve’s liabilities shifts, resulting in a corresponding reduction or increase in the U.S. banking system’s reserves.

The New York Fed can also purchase and sell securities on an account holder’s behalf in U.S. government securities markets, either at auction or in the secondary market. These transactions are executed based on instructions from account holders.

After having been launched as a temporary facility in March 2020, the FOMC established a standing FIMA Repo Facility in July 2021. This facility serves as a backstop in money markets to support smooth market functioning. It does this by creating a temporary source of dollar liquidity for foreign official account holders and can help address pressures in global dollar funding markets that could otherwise affect financial market conditions in the United States.

Most FIMA account holders, which consist of central banks and other foreign monetary authorities with accounts at the Federal Reserve Bank of New York (FRBNY), will be eligible to apply to use the facility. Applications for usage of the facility must be approved by the Federal Reserve.

Keywords: Federal Reserve System.

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