Over the years, repurchase agreements (commonly known as repos)
have become an important financing tool for investment banks in The
Netherlands. Dutch custodians have become important market players
in the provision of tri-party repo services to corporate and
institutional investors. Repos are also used by De Nederlandsche
Bank, the Dutch central bank, to intervene in the money market.
In a repo, a seller's securities are sold to a buyer on the
basis of an agreement that the seller will repurchase equivalent
securities at a later date. The repurchase price is equal to the
purchase price plus a price differential, which is economically
equivalent to interest. Usually, the value of the securities
exceeds the amount of the purchase price, to cover any market risk
of liquidating the securities in the event of default. Most repo
transactions entered into by Dutch parties are governed by the 1995
PSA/ISMA Global Master Repurchase Agreement (GMRA). Repo
transactions are likely to be governed by...