I’ll discuss each of these in turn. Orderly liquidation While repos are generally a low risk, low margin business, they proved to be vulnerable to runs during the financial crisis, when concerns of possible defaults by large financial firms led to a sudden withdrawal of funding from repo markets.
As a result, a reform project led by my colleagues at the Federal Reserve Bank of New York produced a set of measures that have sharply reduced the amount of intraday credit and improved risk management practices in the tri-party repo market. These reforms have made the overall structure of that market much safer, and significantly reduced the likelihood of a borrower default.