Whether bilateral or tri-partisan deposits, deposits are designed so that the lender takes possession of the security when a counterparty does not meet its obligations under the repurchase agreement. While the selection of counterparties and the protection of collateral offer protection, deposits remain subject to counterparty risk. Given the current environment in Europe and as a means of securing access to financing, some European banks have entered into “liquidity swaps” with certain assets – most of them illiquid, including investment-level bank loans – that have allowed them to continue borrowing from the European Central Bank (ECB). These liquidity swaps are, in a way, similar to reseal agreements (sometimes referred to as “term rest”) because European banks (illiquids) sell securities to counterparties (i.e. investment banks or insurance companies); But instead of receiving cash, they receive a value of government bonds or other liquid assets. In return, European banks use this submerged liquidity as collateral to guarantee ECB loans. So far, some French, Italian and other European banks have entered into such transactions with stronger banks and asset managers in order to improve liquidity and access liquid assets that are otherwise not readily available. In 1979, U.S. bank supervisors exempted pension transactions in the retail banking sector from interest rate caps. This has led banks, savings banks and credit institutions to offer pensions to their customers at premium rates. These new products have been positioned to compete with so-called money funds, which are often sold as investment funds to depositors. It is important that these pension transactions are not subject to the protection of the Federal Deposit Insurance Corporation (FDIC).

Several factors influence why an insurer would make a repo instead of a securities loan and vice versa. Although both are classified as secure financing, federal Reserve Bank of New York investigations suggest that deposits are generally concluded when two parties prefer to interact directly with each other (rather than through an agent) or if certain guarantees are requested.