NY Fed, BNY Mellon on Tri-Party Repo
The Federal Reserve Bank of New York recently posted an "Update on Tri-Party Repo Infrastructure Reform," which say, "Three years have passed since the Tri-party Repo Infrastructure Reform Task Force released its seven-point roadmap for reforms needed to (1) sharply reduce the market's reliance on discretionary extensions of intraday credit by the clearing banks and (2) foster improvements in market participants' liquidity and credit risk management practices. A great deal of progress has been made since the New York Fed's last public statement in February 2014. Earlier this spring, Bank of New York Mellon completed the final piece of its new settlement process for triparty repo, achieving a number of reform goals and serving to bring all triparty repo trades into alignment with the roadmap originally laid out by the Industry Task Force back in 2012. As a result, the share of triparty repo volume that is financed with intraday credit from a clearing bank has dropped markedly, from 100 percent as recently as 2012, to a level averaging 3 to 5 percent today (as compared with the Task Force's original target of no more than 10 percent).... However, one remaining element of the Task Force's reform roadmap, namely the full alignment of General Collateral Finance (GCF) repo settlement with the new triparty settlement process, is not yet complete." A press release entitled, "BNY Mellon Achieves Significant Milestone in Tri-Party Repo Risk Reduction Initiative,” also weighs in on tri-party repo reforms. It says, "BNY Mellon, a global leader in investment management and investment services, announced today it completed its tri-party repo risk reduction initiative in support of the recommendations of the Task Force for U.S. Tri-Party Repo Infrastructure Reform. As part of these efforts, BNY Mellon reduced the secured credit extended in the tri-party repo market by $1.44 trillion, or 97%, resulting in the practical elimination of such credit in its program, which was a critical Task Force goal outlined in 2012. This milestone marks the conclusion of a multi-year cooperative effort by BNY Mellon, its clients and other market participants to restructure the U.S. tri-party repo market. It also demonstrates the company's proven ability to use technology to respond to market challenges and anticipate client needs.... Moving forward, BNY Mellon will continue to invest in and enhance its tri-party repo capabilities, including working closely with market participants to improve the process for settling Interbank General Collateral Finance repo trades." Finally, the Federal Reserve also released its latest "Minutes" from the June 16-17 FOMC meeting.
