Reverse Repo — Securities Purchased Under Resale Agreement
Bank provides cash to a counterparty receiving government bonds as collateral, with agreement to resell them.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Reverse Repo Receivable (Secured Lending) | Asset (+) | 10,000,000.00 | - |
| Cash / CBJ Settlement Account | Asset (−) | - | 10,000,000.00 |
💡 Accountant's Note
A reverse repo is a secured lending transaction — the bank lends cash and holds securities as collateral. The securities are not recognized on the bank's balance sheet (the counterparty retains risks and rewards). The bank earns the repo rate on the reverse repo receivable.
Practitioner & Systems Framework
💻 ERP Architecture
Reverse repos are managed in SAP TRM as secured lending or in Oracle FLEXCUBE MM/SY module. The collateral securities must be tracked in the bank's collateral management system even though they are off-balance-sheet. GMRA (Global Master Repurchase Agreement) governs the transaction.
⚠️ Audit Flags
Auditors verify the collateral (government bonds) is held in the bank's name in a segregated account at the CSD during the repo period. If the counterparty defaults, the bank must be able to liquidate the collateral within the prescribed timeframe. Haircut adequacy is tested — under-margined positions require margin calls.
📄 Required Documentation
GMRA agreement, repo confirmation (MT320), CSD collateral holding confirmation, collateral valuation with haircut, and margin call records (if any).
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.