We're looking at the balance sheet of Goldman Sachs here, and we're specifically gonna focus on repurchase agreements which are commonly known as repos. We can see these on the balance sheet in the liability section as security sold under agreements to repurchase, at fair value. So, let's look at the mechanics of how these work. The first thing that happens is there's an effective sale, and we've got a borrower and a lender. And in this case for the repos on Goldman Sachs balance sheet they are going to be the borrower. And what initially happens is Goldman Sachs will give collateral, and for repos, that's typically government bonds. And in return they will receive cash. So this is rather like a, kind of, collateralized borrowing. At the same time as affecting the sale, they'll enter into agreement to repurchase the collateral back at a later date. And that agreement will say, we'll give you slightly more cash, and that's 12.1, which will reflect the kind of interest that they're going to have to pay on this borrowing and they would expect to get the collateral back. If we look at the impact on the financial statements, initially, we see cash go up 'cause this is borrowing and we create a repo liability of 12. Then when they pay 12.1 in cash the repo liability gets cleared, but because they paid slightly more in cash they will record some interest expense on the income statement, and you can just see that with a 0.1 there. So those are repos, repurchase agreements.

If we take a look at reverse repurchase agreements known as reverse repos, these are actually exactly the same thing. But instead of being on the borrowing side you are on the lending side. You would still start with the same mechanics, but you'll end up with a line on the asset side of the balance sheet. And you can see here these are reverse repos and they're about $116 billion here. So Goldman Sachs is actually doing more lending, as you kind of expect, than it is doing borrowing in the repo markets. Let's take a look at the mechanics of reverse repos. So again, we start with a sale, but this time what happens is we've also got a borrow and seller but Goldman Sachs is on the lending side rather than the borrowing side. We start by the transfer of collateral and some cash being paid from the lender, which in this case is Goldman Sachs to the borrower. And at the same time they enter into a repurchase agreement, and that repurchase agreement will say, well, you're going to have to hand over slightly more cash and Goldman Sachs will return the collateral. So what happens on the balance sheet of Goldman, you can see that initially cash goes down by 12 and there's a reverse repo asset created. And then finally, when the repo clears or is repaid, then the reverse repo asset falls and then cash is received but slightly more cash is received and that's reflected as interest income on the income statement of Goldman Sachs. So, we can see those two items on the Goldman Sachs balance sheet with the reverse repos being larger than the repos probably repos is more likely for Goldman Sachs to be a lender in the financial markets than a borrower. Now, there's another item on the financial statement which is worth mentioning here which is called securities loaned. These are very, very similar to repos. However, there's some subtle differences. Repos tend to be items which are collateralized by treasury bonds. However, securities loans can be collateralized by either bonds or equities. And they actually have the right to kind of claw back the collateral if they want to undertake voting if it's an equity security. Not only that, in securities loaned they often are not necessarily receiving cash but actually receiving other securities. So repo is generally a funding, our collateral is treasury bonds and you're receiving cash if you are borrowing under the repo market. Securities loaned, you're typically borrowing securities you may be borrowing cash as well, and those collateral could be either treasury bonds or equities. So there's some subtle differences there, but repos tends very much cash funding where securities loan could be collateral borrowing or lending, and it could be both treasury bonds and equities whereas repos is typically just treasury bonds. So that gives you an overview of the repos and the securities loan on the balance sheet of the Goldman Sachs.