We’ve had the results of ICMA’s European repo survey, but the following chart — by way of the ECB’s statistical data warehouse — offers a much more contemporaneous view thanks to data collected by the ECB via its MFI balance sheet reporting regulation . (H/T to Lorcan Roche Kelly of Trend Macro, by way of Alea.)
Shown in the following chart are the outstanding amounts of repurchase agreements in the Eurozone as of the end of December between MFIs, excluding ESCB, and other financial institutions (excluding insurance corporations and pension funds):
The sudden drop-off at the end of 2011 is *we think* linked to the scarcity of collateral referenced by the ECB’s Mario Draghi in December — which may, or may not, have prompted the ECB’s decision to conduct three-year LTROs.
The scale of the reversal, registering as it does a contraction of some $100bn, is actually quite spectacular.
Though, we should point out, the data is nowhere near as comprehensive as that provided by the European Repo Council’s survey, which captures the entire repo market. Its survey put total outstanding repo sums in the Eurozone at the end of last year at €6,204bn.
But the ECB’s data does provide a useful barometer of what’s been happening in European repo markets. It also goes some way in confirming our fears that the latest spell of the crisis has had as much to do with collateral crunches as it has with fiscal disobedience of peripheral Eurozone members.
Going through the country specific data, the following chart also caught our eye. It’s the ECB’s data for outstanding repurchase agreements between Italian MFIs, excluding ESCB, and other financial institutions as well as non-MFIs (excluding the government) in Italy. (We’ve also left the previous chart in as a comparative):
What’s interesting is the degree to which non-MFI repos boomed in 2010, before falling precipitously in December 2011.
According to the ECB, the non-MFI series excludes MFI repos with other MFIs (including the Eurosystem) as well as repos conducted with institutions that are not resident in the euro area, thus only reflecting borrowing under repurchase agreements conducted with “other euro residents”.
Which, as far as we can tell, means these “other euro residents” were largely responsible for the repo-generated funding boom that hit Italian MFIs from 2010 onwards.
Related links:
Crunch de crédit continu (et collateral) – FT Alphaville
LTRO smackdown – FT Alphaville
Collateral shifts in the eurozone – FT Alphaville