Buba Eases Repo Rules

These are agreements by banks to sell and then repurchase government bonds.

The move, which was expected, followed complaints by banks that a large volume of such dealings in German securities had shifted to London because of the reserve rules. The central banks action was welcomed by Theo Waigel, the finance minister, who said it brought German reserve instruments into line with competitive conditions in international capital markets.

The German banking association said the decision would strengthen Germanys position as a financial centre.

Repo business would gain significance after European monetary union, when dealings would be in a single currency.

The Bundesbanks move would also reduce banks refinancing costs. The Bundesbank said, however, it was still committed to minimum reserves as an instrument of monetary policy.