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Abstract

Repo transactions provide cash/securities management opportunities for financial intermediaries and investors. Repos are the most important financial instrument in Istanbul Stock Exchange in terms of transaction volume. Banker Crisis (1982) and Banking Crisis (1994), occured in Turkey, and also global financial crisis have showed that repo markets are of great importance in terms of systemic risk/financial crisis management. Methodology of the study is based on literature review, data and case study analysis. In this paper, we aim to define inefficiencies of Turkish repo markets to develop policy suggestions in the light of early liberal era experience of Turkey and also financial failure lessons. In this context, we conclude three suggestions for policy makers. First, regulatory/supervisory structure of repo transactions should be cooperatively re-designed by the relevant governmental authorities. Second, acceptable repo collateral list may involve new collateral categories such as equities, eurobond, letter of guaranty and warrants. And finally, OTC repo transactions should regulate from the perspective of risk management.

Keywords:Repo and Reverse Repo, 1982 Banking Crisis, OTC Transactions, Equity Repo, Collateral Management