International experience of the implementation of REPO transactions

Abstract

Background. The development of financial operations in Ukraine causes necessity of studying the experience of Western countries in relation to the carrying out of REPO transactions, particularly from the point of view of the analysis of potential risks and methods of its minimization. Despite the old history of existence of REPO transactions in the market, even in foreign countries, such operations still undergo some changes, due to the development of global financial markets. It determines the relevance of the studied problems.
Analysis of recent researches and publications. The considerable attention to the problem of the peculiarities of conduction of REPO transactions in the financial crisis and post-crisis recovery of economies of leading countries of the world is paid mainly in foreign periodicals, including The Financial Times, The Economic Times, The New York Times, The Economist. They usually carry out a detailed review of the market of REPO operations, including and beyond the crisis state, as well as the risks associated with them. The mechanism of REPO transactions and their use for regulation of the financial market in Ukraine is highlighted in the scientific works of Ukrainian scientists and practitioners. The level of functioning of the REPO market in Ukraine and its imperfection determine the necessity of studying the international experience with such operations.
The purpose of this article is to study practices of foreign countries on carrying out of REPO operations.
Materials and methods. The study was conducted on the basis of scientific works of foreign and domestic scientists, as well as using statistical data of reports of regulatory bodies of the monetary system of the United States and Europe.
The results of the study. REPO transactions were used in the United States from 1917 due to high taxes, which have reduced the attractiveness of traditional forms of lending, soon this practice spread, gaining much activity in the 20-ies of XX century. However, due to the great depression and the II world war they were stopped temporarily and were resumed only in the early 1950-ies. Since the late 70-ies and 80-ies of the last century the rapid growth of the volume of REPO operations began, in part because of the rapid tempo of development of computer technologies.
The author systematized information about the experience of foreign countries in the sphere of carrying out of REPO transactions. The definition of the REPO rate was given and method of its calculation was disclosed. The risks arising from the conducting of REPO operations in foreign countries were investigated. The role and functions of the REPO market were disclosed. The status and the scope of the REPO transactions market in European countries and in the USA were analyzed.
Conclusion. Comparative analysis of REPO markets in Europe and the United States indicates the presence of important differences in the operations conducting, structure and functioning of the two markets in general. Means of implementation security in the REPO market and the ways of risks minimization within carrying out of REPO transactions in modern financial practice are mainly the tripartite REPO transactions.