In this article, we discuss why the demand for bank reserves is so much higher today and why bank regulation prevents bank reserves from going back to pre-GFC levels.
<quote>The Federal Reserve can create new facilities similar to the discount window. If banks can borrow reserves versus collateral from the Federal Reserve, they could keep more securities, such as USTs, on their balance sheets. It would be easier for them to swap the securities into reserves.</quote> <<< the facility mentioned in this quote is SRF (Standard Repo Facility). Right?
Yes, this could be the SRF. However, the SRF is a bilateral facility, which means it is very inefficient for banks to use from a balance sheet netting perspective. A more permanent solution could be a centrally-cleared facility without negative stigma attached to it.
Very interesting to read. Thanks!
<quote>The Federal Reserve can create new facilities similar to the discount window. If banks can borrow reserves versus collateral from the Federal Reserve, they could keep more securities, such as USTs, on their balance sheets. It would be easier for them to swap the securities into reserves.</quote> <<< the facility mentioned in this quote is SRF (Standard Repo Facility). Right?
Yes, this could be the SRF. However, the SRF is a bilateral facility, which means it is very inefficient for banks to use from a balance sheet netting perspective. A more permanent solution could be a centrally-cleared facility without negative stigma attached to it.
Thanks! Please correct me if I am wrong that by using SRF to borrow $100 from FED versus collateral, the bank's balance sheet will increase by $100.
Very interesting. Thanks!