The proposal is partly motivated by concerns that the structure of the US overnight repurchase market may have exacerbated the financial turmoil that followed the collapse of Lehman Brothers in September. Fed officials plan to meet next month with market participants to discuss reforms, the paper said. The FT cited people familiar with Fed’s thinking as saying the central bank is looking into the creation of a mechanism to replace the clearing banks — the biggest of which are JPMorgan Chase and Bank — that serve as intermediaries between borrowers and lenders.
“The Fed is raising questions about whether the system really protects the interests of all participants,” said a person familiar with the Fed’s thinking quoted by the FT.
The Fed hopes to have a new repo system in place by October, when its credit facility for securities companies is to close, the paper said.
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