A panel convened by the Federal Reserve Bank of New York is considering limiting the scope of securities that can be involved in tri-party repurchase agreements and creating an "industry-sponsored entity" that could cover losses related to the transactions.
Those steps "must still be viewed very much as ideas under consideration and not as possible draft recommendations," the New York Fed's Task Force on Tri-Party Repo Infrastructure said in a report Tuesday.
The New York Fed started the task force in September to study possible reforms of the market that provides financial institutions with short-term funding. The panel's members include representatives from Bank of America Securities LLC, Bank of New York Mellon Corp., Citigroup Global Markets LLC, Goldman Sachs & Co. and JPMorgan Chase & Co.
The tri-party market froze as last year's financial crisis deepened, worsening problems for companies struggling to find cash to stay in business. The dried-up liquidity helped spur the collapse of Bear Stearns Cos.
The task force also made several draft recommendations on Tuesday, including pushing for stronger margins on collateral used in tri-party repo transactions.
