European Repo Market as a Part of the International Financial Market

An intense growth of the European repo market began in the 1990's due to the imposition of stricter conditions of minimum capital adequacy of commercial banks and due to the effort to minimize credit risk Another reason for the growth has also been an effort by the commercial banks to use their capital more effectively in the global market. Most central banks use repo as their principal tool in open market operations to control short-term interest rates. Periodic official operations of central banks are not apart of the analyzed repo market. The aim of the paper is to analyze the European repo market in the period before the financial crisis by the end of the 2011 and to compare it with repo operations of commercial banks in the interbank market of euro area. Various methods of analysis, synthesis and comparison have been used in the paper.