reverse repurchase agreement

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Reverse Repurchase Agreement

A practice in which a bank or other financial institution buys securities or another asset with the proviso that it will resell these same securities or asset to the same seller for an agreed-upon price on a certain day (often the next day). Investors and financial institutions do this in order to raise short-term capital. Indeed, it is the equivalent of a short-term loan with the securities or asset serving as collateral. A reverse repurchase agreement is the same as a repurchase agreement, but from the perspective of the buyer rather than the seller. It is also called a matched sale transaction or simply a reverse.

reverse repurchase agreement

The purchase of an asset with a simultaneous agreement to resell the asset on a given date at a specified price. The result is simply a loan at a prescribed rate for a predetermined period while holding the asset as collateral. Also called reverse. Compare repurchase agreement.
References in periodicals archive ?
5-percent yield on Tuesday's net injection of 150 billion yuan using reverse repos, according to a PBOC's statement.
The People's Bank of China offered CNY50bn of seven-day reverse repos in open-market operations.
Bankers were complaining that the cash collected by the central bank through reverse repos was being returned to the economy within a week, and so it was not making any big difference in easing the excess liquidity situation.
The changes, involving reverse repos and derivatives, reduce the assets included in the calculation and make it easier for them to meet leverage ratio requirements, depending on the final rules adopted by national regulators.
7 billion) into the financial system via reverse repos in order to ease a cash squeeze at the end of the month, the central bank said in a statement carried by Xinhua.
The Adviser is awaiting a response from the rating agencies in order to determine whether a refinancing of additional preferred shares with debt and/or reverse repos would be feasible for the funds.
Since the liquidity provider takes the first loss position and the reverse repos provide full recourse to UniCredit, the likelihood of the liquidity provider suffering a loss is directly tied to the creditworthiness of UniCredit.
NRB has mopped up a total of Rs 166 billion from the financial system by launching reverse repos, outright sale auction and development bonds.
In our 2012 outlook, we forecast approximately CNY 4 trillion in liquidity assistance, which will come via a combination of reserve requirement reductions, central bank reverse repos and auctions of Ministry of Finance deposits.
Support for SPICE I, in reference to the reverse repos, is provided through a swap transaction supplied by CDCFP.
Repos and reverse repos are used to maintain liquidity levels in the market as well as to keep overnight interest rates close to the target.
The CRC is available to customers on both the buy and sell-sides and is expected to appeal to corporates entering into reverse repos to secure their financing and then re-use the collateral they receive to cover OTC derivative margin requirements with clearing members or CCPs.