Tri-party repo reforms pose new challenges

Three's a crowd

Steven Misischia

It all sounds very simple: one party borrows cash from another in return for collateral,  with a big, strong clearing bank standing between the two. It is a practice that has existed in the US for decades, and dealers have come to rely on the tri-party repo market as a critical source of funding. But it also represents a huge risk to the financial system – a fact that was quickly recognised after the collapse of Lehman Brothers in 2008. Regulators and banks have been working since then to reduce