Structural weaknesses of the Spanish government debt repo market and their implications during the crisis
Fecha: marzo 2012
José Manuel Amor
Deuda pública
Spanish and International Economic & Financial Otlook, SEFO, V. 1 N.º 0
A properly functioning repo market for government debt securities is critical to the efficient and smooth functioning of the financial markets as a whole. Suitable trading, clearing, and settlement infrastructure is a crucial component of ensuring the repo market can perform its pivotal role. In the Spanish case, deficiencies related to the lack of interconnectivity, together with the perception of weak risk management at the domestic Central clearing counterparty for repo, fuelled existing tensions experienced by domestic financial institutions seeking to fund their growing government debt portfolios. Access of the larger Spanish Banks to the main European CCPs, and second, the ECB three year refinancing operations, have provided some breathing space. However, the current situation is far from optimal, so infrastructure deficiencies must be properly addressed.