While conducting research for our 2014 survey of institutional investors in securities lending and collateral management, we came across this interesting note from the Minnesota’ State Board of Investments. It turns out that Minnesota has been running a repo program for community banks. Are there more programs like this? Please e-mail us (info@finadium.com) if you know of any. Details on the Minnesota program are below.
“In recent years, community banks throughout Minnesota have experienced an increased need for funds due to a reduction in local deposits and a reduced ability to sell investments held in bank portfolios due to changes in federal accounting requirements. The SBI created the Securities Repurchase Program to help meet the increased needs of banks throughout the state.
Under the program, the SBI temporarily buys securities such as Treasuries and Governments from banks under a repurchase agreement (repo). At the end of the agreement period, the securities are returned to the selling banks (i.e. “repurchased”) and the bank pays the SBI principal and interest.
The transactions are fully collateralized and range in size from $100,000 to $2 million per institution. For ease of administration, the program uses the same rates, offering dates and maturity dates as the SBI’s CD program.
During fiscal year 2012, the SBI purchased $4.3 million in repos from Minnesota financial institutions.”
Here’s the source: http://mn.gov/sbi/publications/2012AnnualReport.pdf.
We’d be interested to learn about any more programs like this one.