Swiss Repo Agreement

Term refers to a repository with an indicated end date: Although rests are usually short term (a few days), it is not uncommon to see rest with a lifespan of up to two years. Fleming M.J., Garbade K.D.: Pensions with negative interests. Federal Reserve Bank of New York. Econ. It`s Financ. 10(5) (2004) The SNB uses repurchase operations to manage the liquidity of the financial system and, therefore, the liquidity supply of the economy. These must be distinguished from foreign exchange reserve transactions that the SNB uses to manage its foreign exchange investments (see questions and answers on asset management) and pension transactions under liquidity exchange agreements to provide foreign exchange to SNB counterparties (see questions and answers on foreign exchange swaps). Repo operations are temporary, with durations generally ranging from one day (night) to a maximum of one year. The SNB conducts liquidity or liquidity-absorbing pension transactions, depending on what is required in terms of monetary policy and liquidity.

In the case of a liquidity collection operation, the SNB buys securities from a bank (or another market player) and allocates the corresponding amount in Swiss francs to the counterparty`s current account with NATIONALbank. At the same time, it was agreed that at the end of the life, the counterparty would accept securities of the same type and quantity by the NSS. For this fixed-term franc loan, covered by securities, the counterparty pays interest (so-called reposatz). Conversely, the national bank sells securities to the counterparty and debits the corresponding amount of Swiss francs into the counterparty`s current account, provided that the SNB repurchases the securities at the end of the period. The SNB pays the counterparty an interest rate, i.e. the deposit, over the duration of the contract. Similarly, banks refinance each other (in the secure interbank market) to manage their liquidity. “I think in the future the SNB will use deposits as a tool to control interest when needed.” (1 USD – 0.9675 Swiss francs) (John Revill report, cut: Larry King) In addition to using Repo as a financing vehicle, repo-traders are “marketplaceing.”

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