A pension contract (repo) is a short-term guaranteed credit: one party sells securities to another and agrees to buy them back at a higher price at a later price. The securities serve as collateral. The difference between the initial price of the securities and their redemption price is that of the interest paid on the loan called the pension rate. Pension transactions are generally considered to be a reduction in credit risk. The biggest risk in a repo is that the seller does not maintain his contract by not repuring the securities he sold on the due date. In these cases, the purchaser of the guarantee can then liquidate the guarantee in an attempt to recover the money he originally paid. However, the reason this is an inherent risk is that the value of the warranty may have decreased since the first sale and therefore cannot leave the buyer with any choice but to maintain the security he never wanted to maintain in the long term, or to sell it for a loss. On the other hand, this transaction also poses a risk to the borrower; If the value of the guarantee increases beyond the agreed terms, the creditor cannot resell the guarantee. This is the “eligible security profile” that allows the purchaser to take the risk of defining his appetite for risk with respect to the collateral he is willing to hold for his money.

For example, a more reluctant pension buyer may only hold “current” government bonds as collateral. In the event of liquidation of the pension seller, the guarantee is highly liquid, so that the pension buyer can quickly sell the security. A less reluctant pensioner may be willing to take bonds or shares as collateral without investment degree bonds or shares, which may be less liquid and which, in the event of a pension seller`s default, may experience higher price volatility, making it more difficult for the pension buyer to sell the guarantees and recover his money. Tripartite agents are able to offer sophisticated collateral filters that allow the repo buyer to create these “legitimate collateral profiles” capable of generating systemic collateral pools reflecting the buyer`s appetite for risk. [13] However, at the Hutchins Center event, Tarullo found that reserves and treasuries “are not treated as fungible when planning resolution or liquidity stress tests.” In the post-crisis context, banks are required to conduct their own internal liquidity resistance tests, the Comprehensive Liquidity Analysis and Review (CLAR), which are controlled by supervisory authorities.