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Analysis of risk factors in the Korean repo market : Based on the US and European repo market experiences

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Frame of Image h and Payment Systems Division, De Nederlandsche Bank, E-mail: ronald.heijmans@dnb.nl
Contents
Ⅰ . Introduction ··············································································· 1 Ⅱ . Comparison between US and European Repo Markets ···· 2
1. Definitions ································································································ 2 2. Types of repos ························································································· 2 3. US and European Repo Markets ························································· 4 4. Experiences of the Global Financial Crisis ·········································· 9
Ⅲ . Conditions of Korean Repo Market, and Concerns ········· 15
1. Conditions of Korean Repo Market ················································ 15 2. Concerns to be addressed ·································································· 21
Ⅳ . Summary and Policy Implications ········································ 29 References ······················································································ 32
Analysis of Risk Factors in the Korean Repo Market: Based on the US and European Repo Market Experiences
Repo markets had been deemed more resilient against market instability compared to the unsecured inter-bank loan markets. In the US and Europe, however, prolonged investor runs on repos developed during the global financial crisis. Furthermore, in the course of the evolution of the crisis, the repo mark


Full Text
Title Analysis of risk factors in the Korean repo market
Similar Titles
Sub Title

Based on the US and European repo market experiences

Material Type Reports
Author(English)

Yun, Sung-guan; Heijmans, Ronald

Publisher

[Seoul]:The Bank of Korea

Date 2013-12
Series Title; No BOK Working Paper
Pages 37
Subject Country United States(Americas)
South Korea(Asia and Pacific)
Europe(Europe)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding The Bank of Korea; KDI School

Abstract

Repo markets had been deemed more resilient against market instability compared to the unsecured inter-bank loan markets. In the US and Europe, however, prolonged investor runs on repos developed during the global financial crisis. Furthermore, in the course of the evolution of the crisis, the repo markets in the US and Europe showed differing movements. In contrast, no risks arising from the Korean repo market have yet emerged in practice thanks in part to its small market volume during the global financial crisis, but it could give rise to significant risks due to some fragility arising from factors such as the increase of trade concentration. For this reason, we wish to identify some weak points, and suggest some areas for improvement such as a ceiling on the amount of borrowing, and on the proportion of illiquid collateral held by investors. (The rest omitted)