Also because you all love #RepoTwitter. The gold-plating of GSIB rules + LCR rules in the US certainly did play a part in the recent repo spikes. The interesting thing is that Q4 is the cutoff for the US scores. That's why JPM (& others, but JPM is the biggest) 1/n
has consistently reduced its score in 4th quarters, sometimes by as much as 40 points (out of 730ish.) Obviously balance sheet size and funding are important items (but no the most important ones) in the US GSIB score
This time, JPM has just published data that is consistent with its biggest score ever at (est.) 750. The problem is that 730 is the cutoff for the 4% capital charge instead of 3.5%. So you can be pretty sure that JPM will reduce its scores like mad in Q4....
probably all the way below 700. This will not only impact the repo market - JPM usually focuses more on Level 3 assets & OTC derivatives for GSIB score reduction, but this time the effort required is much bigger than last year. So there will be market shocks because of this!!!
