Fitch: NY Fed Reverse Repos Offset Declines in U.S. Money Fund Exposure to European Banks

Tue Feb 4, 2014 1:04pm EST

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(The following statement was released by the rating agency) NEW YORK, February 04 (Fitch) U.S. prime money market funds (MMFs) reduced their exposure to European banks in December 2013, with the declines mainly offset by repo exposure to the Federal Reserve Bank of New York (FRBNY), according to Fitch Ratings. The FRBNY has been periodically conducting overnight reverse repurchase agreement (RRP) exercises with market participants, including MMFs, to test how these operations might function as a policy tool for managing short-term interest rates. This test accounted for 3.7% of all MMF assets within Fitch's sample at end-December. By comparison, the MMF's allocation to European banks declined by 3.9% (i.e. expressed as a percentage of MMF assets) during December. Fitch notes that it is unclear whether the FRBNY exercise might have crowded out some of the MMF allocations to European banks or whether the European reduction reflects a new equilibrium taking hold. Primarily as a result of the RRP exercise, MMF allocations to U.S. Treasurys and agencies, including both security holdings and through repos backed by government securities, increased to 27.1% of MMF assets from 22.9% of assets. Eurozone allocations accounted for 16.8% of MMF assets as of end-December, a decline from 19.1% of assets at end-November, 2013. For further analysis and the full MMF allocations, the report 'U.S. Money Fund Exposure and European Banks: Decline as Fed Tests Reverse Repo,' is available at 'www.fitchratings.com.' Contact: Robert Grossman Managing Director +1-212-908-0535 Fitch Ratings Inc. One State Street Plaza New York, NY 10001 Martin Hansen Senior Director +1-212-908-9190 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at ‘www.fitchratings.com’. Applicable Criteria and Related Research: U.S. Money Fund Exposure and European Banks: Decline as Fed Tests “Reverse Repo� here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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