Federal Reserve adds RRP counterparties

On November 12, 2014, the Federal Reserve Bank of New York (the New York Fed) announced the application submission deadline for the final wave of reverse repurchase agreement (RRP) counterparties.  The 25 new RRP counterparties selected from this last wave were added to the complete list of RRP counterparties on January 16, 2015.  The new counterparties have now completed the legal, operational and technical setup and are expected to be able to fully participate in the RRP operations with the New York Fed on March 16.

All RRP counterparties are expected to satisfy the continued eligibility criteria previously set forth.  Specifically, banks must maintain a minimum of $30 billion in total assets or $10 billion in reserve balances each quarter; government-sponsored enterprises must maintain a minimum of $1 billion in average daily outstanding amount of RRP transactions; and money funds must maintain a minimum of $5 billion in net assets at each month-end.  In addition, all RRP counterparties must meaningfully participate in RRP transactions with the New York Fed, which can be interpreted as bidding in RRP operations at least twice every six months.  The New York Fed may remove an entity from the RRP counterparty list if such counterparty fails to continue to meet any of the eligibility criteria.

The November 12 announcement stated that firms that meet the eligibility criteria will be allowed to submit applications, but that the New York Fed does not anticipate increasing the total number of expanded RRP counterparties after the last wave, unless the addition of new counterparties is deemed necessary to support the implementation of monetary policy.  As such, the number of expanded reverse repo counterparties is not expected to exceed 150.  Firms that are deemed to be eligible will be added to the RRP counterparty list if the maximum number of expanded reverse repo counterparties has not been reached.

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