The advantage to a lender in a repurchase agreement transaction versus a fed funds sale is the collateral of government securities or other acceptable liquid assets provided by the borrowing FI.

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In a repurchase agreement, the lender receives collateral in the form of government securities or other acceptable liquid assets from the borrowing financial institution, which reduces the risk of default. In a fed funds sale, there is no such collateral provided.

The Advantage to a Lender in a Repurchase Agreement Transaction