Calendar things

Keep calm and carry on

Why did the Fed’s Reverse Repo Facility (RRP) rise alongside the Standing Repo Facility (SRF) during year-end? Regulation, regulation, regulation!

As the Fed puts it:

“Dealers and other financial institutions often engage in what is known as window dressing by altering their behavior around financial reporting dates, which are typically quarter- or month-ends, in order to minimize the effects of a variety of regulatory or accounting rules.”

Let’s use ONE example of these regulatory rules: Basel III Leverage Ratio = Common Equity & Retained Earnings / Total Assets (image below for more details):