This paper examines the reciprocal lending relationships between financial conglomerates (FCs) in the repo market to better understand the following key points: what motivates powerful firms to engage in this type of contemporaneous cross-funding relationship; and the implications of such reciprocal transactions for the agents involved and for the market as a whole. In particular, in terms of the implications, we focus on two dimensions: first, the potential effects that reciprocal lending has on the market power of FCs and the competitiveness of the repo market for mutual funds; and second, the potential implications that frequent and stable reciprocal lending can have in terms of data from the Mexican repo market, we show that reciprocal lending between financial conglomerates is mutually beneficial as it reduces search costs for borrowers and mitigates credit risk concerns for lenders. Further, we find that reciprocal lending favors market concentration of the repo lending in a few powerful funds and increases fund market power. Finally, we find that reciprocal lending also leads to centrality within the financial network and increases the dependence between the parties involved. Interestingly, a higher intensity of reciprocal lending can harmful, but this does not necessarily deteriorate financial stability.