Fed’s plan to end ‘window dressing’ stirs repo debate
Change to G-Sib surcharge could smooth year-end volatility, but some fear liquidity will worsen
A proposed change to the way the US Federal Reserve calculates the capital surcharge for global systemically important banks (G-Sibs) could have profound implications for the repo and derivatives markets.
Banks typically scale back balance sheet-intensive activities such as derivatives and repo trading ahead of deadlines for reporting regulatory metrics that are used to calculate capital add-ons. The practice, known as ‘window dressing’, has contributed to sharp reductions in dealer capacity at
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