Monetary tools that provided temporary adjustments to the balance sheet, such as reverse repurchase agreements and term deposits, were used to meet these operational needs.
Notwithstanding its nominal form as a sale and subsequent repurchase of a security, the economic effect of a repurchase agreement is that of a secured loan.
This is especially possible within the framework of temporary operations such as security lending, option to repurchase, buy to sell back or repurchase agreement.
A repo, or repurchase agreement, allows a dealer to sell and repurchase short-term government securities to a lender at a specified future date and an agreed price.