This paper examines the reciprocal lending (RL) relationships between financial conglomerates(FCs) in the repo market. Using transaction-level data from Mexico, we find that the main economicforce behind RL relationships is related to the possibility to build deep and intense mutual lendingrelationships in the repo market and execute them at lower rates. Further, we find that RL favorsmarket concentration of the repo lending in a few funds and increases FC-affiliated fund marketpower. Finally, a deep reciprocal relationship between FCs lowers systemic risk and also decreasesthe bank-level contribution to it. However, when funds depend more on a single bank to positiontheir excess liquidity, systemic risk increases.