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Fed Says Banks Cite Regulations Among Reasons for Repo Spike - Bloomberg

Many of the largest U.S. banks pointed to regulatory restrictions on their balance sheets and reduced risk appetite to explain why they stood on the sidelines during the mid-September spike in overnight funding rates instead of profiting from the excess demand for short-term lending, according to a Federal Reserve survey. Three-fourths of primary dealers responding to the Fed’s December Senior Credit Officer Opinion Survey reported “basically no change” in secured lending from Sept. 16-18, compared with the first week in September, despite a higher lending rate. Fed officials had expected banks with excess liquidity to jump in with extra lending. Bloomberg

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