Audio explainer: ‘Repo 105’ accounting

By the time Lehman Brothers imploded, $25bn in capital was supporting $700bn of assets and liabilities, a leverage ratio that was regarded as extremely high.

According to the report by court-appointed examiner Anton Valukas released on Thursday, Lehman engaged in what was referred to internally as “Repo 105”. This, the report claims, was a sort of window-dressing which involved getting $50bn of assets off the firm’s balance sheet at the end of both the first- and second-quarter balance sheets in order to maintain favourable ratings from credit rating agencies.

See an illustrated explanation of Repo 105 accounting in the slideshow below.