Direct lending, in all its varieties,not always profitable. In some cases, it will be more efficient to use other methods of improving financial condition, one of which is a repo transaction. This is such a special system of buying and selling, under which a prerequisite is set: the seller buys the previously sold goods, whatever they may be. Unlike a pledge, with such an approach for a short period all rights of use are transferred directly to the buyer (with rare exceptions). Only when the reverse operation is performed, will the possibility of full use of the repo object be returned to the original owner. Such transactions have a rather long history, and, given the peculiarities of such an approach, legislation only relatively recently developed a more or less clear and adequate position on this issue.
For the first time something similar to REPO transactions arose even morein 1917 in the United States of America. The reason was very high taxes raised in connection with military actions. It became extremely difficult and very unprofitable to use pre-existing credit systems. There was a need to invent something new, more effective. REPO is an abbreviation for the English word repurchase agreement, which translates roughly as a "sales agreement". The first system was used by the Federal Reserve Fund, that is, conditionally state organization. Initially, this was done in order to qualitatively and successfully ensure lending to the banking system. Gradually, the benefits of this approach became clear to the rest of the companies and firms. And until the Second World War and the Great Depression, such deals became more and more popular. Then the economic situation changed, and the need for such tools simply disappeared for about 30 years. The repos became relevant only in 1950, and since then they have been spreading around the world again, gaining popularity. In particular, it is computers, communications and everything related to it that has become the next impetus for the further development of the financial instrument.
Some believe that REPO deals are an optionpurchase or sale of a property. In fact, the main task of such an operation is short-term lending in exchange for property that has approximately the same value (both tangible and intangible). It should be noted that in many situations the price of the transaction object at the beginning of its commission is somewhat less than in the end. That is, for example, there is an action that costs 10,000 rubles. The company sells this security and gets 10 thousand for it. Since REPO provides for mandatory subsequent redemption, after some time it will be necessary to perform a reverse operation. But by the time of its implementation, it may turn out that now this share is worth already 15 thousand. As a result, the company will have to return not 10, but 15 thousand rubles. The interest of both sides is quite obvious. So, the borrower very quickly receives the required amount, and the creditor for a relatively short period of time receives a significant profit. Naturally, as in any other financial situations, risks are always possible, which in this case will be higher than in more stable and understandable operations with lending. But the income is worth it.
Сделка РЕПО с акциями является самой common, profitable, simple and popular. Initially, it was understood that such operations will be carried out exclusively with securities. Nevertheless, with the development of the system, an understanding emerged that, by analogy, it is possible to work with any other goods or products. The meaning of such operations is absolutely the same, but the main feature is a more complex paperwork. For example, to re-register ownership in repo transactions for a security, you will need to spend a small amount of time. But to carry out the same operation with goods, products, equipment or real estate will have to specifically deal with the problem, which may require considerable effort and take more time.
Вкратце о том, что получает заемщик и кредитор, It was told above. But given the fact that it is mutually beneficial cooperation that is the basis for concluding any direct repo transaction (as well as any other financial arrangements), this issue should be discussed in more detail. So, the lender (that is, the person who acquires the object) benefits precisely this approach, because he becomes the full owner of the property. In the classical lending variant, the ownership would still remain with the borrower, which in some cases is extremely unprofitable (especially when the benefit is greater, the less the sale period of the goods). For example, if for some reason the creditor refused to repurchase his former property, the second party can quickly and simply, as a full owner, sell the goods and get his profit. You will not have to wait, arrange proceedings in court, resort to bankruptcy proceedings, and so on. It should be noted that only the value of the object of the contract is important for the very fact of the transaction, and not the financial condition of the borrower at the moment. That is, one may not be interested at all in the person to whom the money is given, if it offers a liquid object and can confirm the right to its ownership. As a result, the procedure itself is greatly simplified and accelerated. The same feature is beneficial for the second borrower. No matter how bad things are going with his finances, if he has liquid securities (or another similar product), he can get money, and for that he doesn’t have to spend a lot of time or energy.
There is another feature that is inherent onlya repo transaction. An example is the following: a company sells shares owned by it. The actual owner of the securities is the lender, but he does not receive dividends - they are considered the property of the previous owner up to the moment when he refuses to repurchase the repo object. At the same time, the votes that give the shares already belong to the lender, which can be a problem in some situations. Many firms prefer simultaneously with the transaction to execute a contract for power of attorney in order not to lose the right to vote. Naturally, it all depends on the relationship of both parties, the characteristics of their work and many other factors.
Есть ещё одна важная и очень интересная a feature that distinguishes repos. This is a tax payment. In particular, many of the variants of such buying and selling operations that concern specifically emitted securities are much more profitable than others. For example, with a normal transaction would have to pay tax for the fact of the operation. But in the case of repos, an option is considered in which payment is made solely for the difference between the initial price of a share (or other similar security) and its final value. It is much more profitable than with another system. It should be noted that this concerns not only securities, but also those types of transactions that have been completed successfully. That is, the shares were bought back, and did not remain in the property of the lender. You also need to consider that the maximum period should not exceed 6 months.
One of the basic problems that arise whenthe need to use just such a tax system, is the need to clearly classify the transaction and its object. That is, it is necessary to clearly understand whether a particular operation is a simple purchase or sale of a security, or whether it is a repo type lending system. Actually, the requirements and conditions of such an operation were described above. The term is not more than 6 months, the object is the same, referring to the issued securities. There are only two participants in the transaction, and they do not change, and so on. Only if the procedure meets all the requirements will it be possible to provide a preferential taxation system. It should be noted that the law allows a slight prolongation, but not more than until the end of the current period. For example, if the term of the transaction ends on December 10, then you can extend it until the end of the month, but no more.
The Bank of Russia currently uses suchtypes of transactions solely to provide liquidity. He acts only as a buyer acquiring securities from credit organizations. No other parties are considered market participants. Among other things, it should be borne in mind that in order to take advantage of the opportunities mentioned above, credit organizations must necessarily meet the stated requirements of the Central Bank. Otherwise, no one will work with them either. Accounting for repos in banks involves three types of discounts - lower, primary or upper level. It should be understood that at 100% initial discount, the share will not be taken as collateral.
Сделки РЕПО с Банком России осуществляются двумя in ways. The first involves an auction, the second - a fixed price. Weekly tenders are held to transfer funds for 1 week. Separate auctions may be held separately, already focused on loans for a period of up to 6 days. Time intervals, assessment of the adequacy of orders, amounts and other transaction factors are determined only by the Bank of Russia.
Unlike the tax system where importantvarious features, properties, since this can significantly change the amount to be paid, in accounting it is much easier. So, all such transactions are displayed simply as the purchase or sale of an asset. There are no special features or other non-standard actions here, therefore it is necessary according to the standard scheme to simply reflect first the movement of the object of the REPO contract in one direction, and then, as it is returned, in the other.
Based on the foregoing, you can dothe conclusion that a repo transaction is a fairly simple and clear mechanism for lending. It has many advantages over conventional, more classical systems, but there are some drawbacks. One of these may be an increased risk, but the most embarrassing is the need to transfer any assets to full ownership. Only really large companies can afford to do this.
