Repo desks up in arms about NSFR
The cost of some repo transactions would leap 850% under a draft version of the NSFR, banks claim. One regulator admitted last week there could be unintended harm to the market and implied the rules could change
Bank lobbyists are mobilising to combat a new threat to the repo market, which they claim could drive up the cost of some transactions by more than 850% – from seven basis points today, to 67bp if Basel III's net stable funding ratio (NSFR) is implemented as outlined in January. That could filter back into financing costs, with investors demanding more yield to make up for the cost of borrowing securities, and would dramatically cut the liquidity available in reverse repo markets, bankers warn.
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