2 Ann. Rev. Banking L. 257 (1983)
Retail Repurchase Agreements: Overcoming Insecurity within the Securities Laws

handle is hein.journals/annrbfl2 and id is 261 raw text is: RETAIL REPURCHASE
AGREEMENTS: OVERCOMING
INSECURITY WITHIN THE
SECURITIES LAWS
A repurchase agreement (repo) is a short-term contract I is-
sued by a bank 2 for the sale of United States government or agency
securities, with a simultaneous agreement by the bank to repurchase
those securities on a predetermined date.3 Banks have issued repur-
chase agreements for decades,4 primarily to corporate customers
In order to escape Regulation Q interest rate restrictions and Regulation D
reserve limitations, banks must limit the term of repurchase agreements to less than
ninety days for repurchase agreements of less than $100,000. See 12 C.F.R.  217,
l(f)(2)(ii) (1982) (Federal Reserve Board); 12 C.F.R.  329.10(b)(2) (1982) (Federal
Deposit Insurance Corporation); 12 C.F.R.  531.12 (1982) (Federal Home Loan
Bank Board). Repurchase agreements above the $100,000 limitation are not subject
to Regulation D or Qor to the ninety day restrictions. See 12 C.F.R.  204.2(a)(i)
(vii)(B)(1982); 12 C.F.R.  217.1(f)(2)(1982). They are also free from borrowing or
lending limitations. See 12 C.F.R.  82, 84 (1982); 12 C.F.R.  7.1131 (1982). The
Federal Deposit Insurance Corporation has issued a proposed rule eliminating the
ninety day maximum requirement for repurchase agreements less than $100,000. 47
Fed. Reg. 37,248 (1982).
2 For purposes of this Note, bank means any depository institution, including
commercial banks and thrift institutions (mutual savings banks, savings and loan
associations, or credit unions).
3 See Bowsher, Repurchase Agreements in INSTRUMENTS OF THE MONEY MARKET, 52
(Fed. Res. Bank of Richmond 1981) (hereinafter cited as Repurchase Agreements); OCC
Staff Analysis of Certain Legal Issues Raised by Retail Repurchase Agreements,
accompanying Banking Circular No. 157 (May 13, 1981) reprinted in [Current] FED.
BANKING L. REP. (CCH)   60,798 [hereinafter OCC Staff Analysis].
4 Repurchase Agreements, supra note 3, at 57. Since 1969, bank issues of wholesale
repos have blossomed, sustaining a twenty-four percent average annual growth rate.
This growth is attributed to the higher interest rates of the past fifteen years, the
continued prohibition against interest payments on corporate demand deposits, and
technological advancements which facilitate cost-efficient, short-term transfers of
commercial paper. Id.

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