国际清算银行-从地板上爬起来

BISWorkingPapers

No1100

Gettingupfromthefloor

byClaudioBorio

MonetaryandEconomicDepartment

May2023

JELclassification:E42,E43,E52,E58.

Keywords:monetarypolicyoperatingprocedures,centralbankbalancesheets,abundantvsscarcereservessystems.

ISSN1020-0959(print)

ISSN1682-7678(online)

BISWorkingPapersarewrittenbymembersoftheMonetaryandEconomicDepartmentoftheBankforInternationalSettlements,andfromtimetotimebyothereconomists,andarepublishedbytheBank.Thepapersareonsubjectsoftopicalinterestandaretechnicalincharacter.TheviewsexpressedinthemarethoseoftheirauthorsandnotnecessarilytheviewsoftheBIS.

ThispublicationisavailableontheBISwebsite().

©BankforInternationalSettlements2023.Allrightsreserved.Briefexcerptsmaybe

reproducedortranslatedprovidedthesourceisstated.

1

Gettingupfromthefloor

1

ClaudioBorio

HeadoftheBISMonetaryandEconomicDepartment

Abstract

SincetheGreatFinancialCrisis,agrowingnumberofcentralbankshaveadoptedabundantreservessystems(“floors”)tosettheinterestrate.However,therearegoodgroundstoreturntoscarcereservesystems(“corridors”).First,thecostsoffloorsystemstakeconsiderabletimetoappear,arelikelytogrowandtendtobelessvisible.Theycanbeattributedtoindependentfeaturesoftheenvironmentwhich,infact,aretoasignificantextentaconsequenceofthesystemsthemselves.Second,formuchthesamereasons,thereisariskofgrosslyoverestimatingtheimplementationdifficultiesofcorridorsystems,inparticulartheinstabilityofthedemandforreserves.Third,thereisnoneedtowaitforthecentralbankbalancesheettoshrinkbeforemovinginthatdirection:foragivensize,thecentralbankcanadjustthecompositionofitsliabilities.Ultimately,thedesignoftheimplementationsystemshouldfollowfromastrategicviewofthecentralbank’sbalancesheet.Ausefulguidingprincipleisthatitssizeshouldbeassmallaspossible,anditscompositionasrisklessaspossible,inawaythatiscompatiblewiththecentralbankfulfillingitsmandateeffectively.

Keywords:monetarypolicyoperatingprocedures,centralbankbalancesheets,

abundantvsscarcereservessystems.

JELcodes:E42,E43,E52,E58.

1Thispaperwaspublishedas

SUERFPolicyNote,no311

.Itisanextendedversionofthekeynotespeechdeliveredattheworkshop“Beyondunconventionalpolicy:Implicationsforcentralbanks’operationalframeworks“,hostedbytheNetherlandsBankinAmsterdamon10March2023.IamverygratefultoAerdtHoubenforinvitingmetogivethatspeech.IwouldalsoliketothankMortenBech,UlrichBindseil,StijnClaessens,PitiDisyatat,RobertMcCauley,BillNelson,FrancescoPapadia,AndreasSchrimpf,MasaakiShirakawaandNikolaTarashevaswellasworkshopparticipantsforcommentsandveryvaluablediscussions.TheviewsexpressedaremyownandnotnecessarilythoseoftheBIS.

2

Introduction

TheGreatFinancialCrisis(GFC)hasbeenawatershedforthewayinwhichcentralbankssettheshort-terminterestrateonaday-to-daybasis.Thecrisishasliterallyupendedtheseoperatingprocedures.Isthechangedesirableorshoulditbereversed?

Thequestionmayappearinconsequential,atleastatfirstsight.Afterall,whyshoulditmakeabigdifference?Allthatmatters,itcouldbeargued,isatwhatleveltherateisset,nothowitisset.Indeed,whilethingshavechangedsomewhatinrecentyears,akeeninterestinoperatingproceduresremainsgenerallylimitedtocentralbankersandthemarketparticipantsmostdirectlyconcerned,particularlythoseactiveinmoneymarkets.

Thislimitedinterest,whileunderstandable,isregrettable.Foroperatingproceduresshedlightonthegreatpowerthatcentralbankswield,aswellasonthesourceofthatpowerandonitslimits(Borio(1997)).Moreover,theyalsohavebroaderimplicationsforthefunctioningofmoneyandevencapitalmarkets,forhowmonetarypolicyspreadsitsinfluencethroughthefinancialsystem,forcentralbankemergencyinterventionsattimesoffinancialstressandfortheoptimalsizeandstructureofthecentralbank’sbalancesheet.

Againstthisbackdrop,thispaperassessesthepost-GFCsea-changeinoperatingprocedures.Itdoessofromtheperspectiveofsomeonewhohasstudiedtheminthepastandseescurrentdevelopmentswithamixofsurpriseandsomediscomfort.Myhopeisthattheanalysiswillmakeitclearthatthediscomfortisnotjustamatterofunjustifiednostalgia.

Morespecifically,thepaperexaminestherelativemeritsofabundantreservessystems(ARS)andscarcereservessystems(SRS)inimplementinginterestratepolicy.Thisiswhathastypicallybeenreferredto,somewhatinaccurately,astherelativemeritsoffloorversuscorridorsystems.Thatsaid,theanalysiswillalsoaddressmorebrieflythebiggerandcloselyrelateddebateoverthesizeandcompositionofthecentralbank’sbalancesheet.

ThekeytakeawayisthatitisworthgivingseriousthoughttoreturningtoSRS–“gettingupfromthefloor”,asitwere.

Thefirstsectionsummarisesthepost-GFCsea-change.Thesecondexplainsitmightbedesirabletoreversecourse.Thethirdconsidersthebroaderquestionofthecentralbank’sbalancesheet.Theconclusionsummarisesthekeymessages.

Thesea-change

Thecommonfeaturesofpre-GFCoperatingprocedureswereveryclear.Theoverridingobjectivewastomakethepolicystanceeffectivewhileatthesametime

3

leavingaminimalimprintonthefinancialsystem.Thisgaverisetothree,tightlyrelated,characteristics.

2

First,therewasasingleoperatingtargetattheveryshortendofthecurve,almostinvariablyanovernightrate.

3

Thisrate,ineffect,capturedtheoverallmonetarypolicy

stance–intechnicalterms,itwasasufficientstatisticforthatstance.

Second,the“decouplingprinciple”ruled.Signallingdidtheheavyliftinginsteeringtheovernighttarget.Throughsignals,thecentralbankwouldtellbankswhereitwantedtheovernightratetobe.

4

Inthemeantime,light-touchliquidity

managementoperationsworkedonlyinthebackground.Theywouldkeepthe

marketforbankreservesinbalanceandensuredthatthedemandforsettlement

balances“didnotgetintheway”.

5

Importantly,theoperationsweredesignednottodisturbmarketprices.

6

Therestofmarketratesthenalignedseamlesslywiththe

overnightrateandexpectationsthereof.Ofcourse,thecentralbankcouldpulloffthismagicsignalling“trick”–oftenlittleappreciatedbynon-specialists–becauseofitsmonopolyoverthesupplyofbanks’settlementbalancesanditsabilitytosetfeaturesofthedemandforthem,suchasthetermsonreserverequirements(egaveragingandremuneration).

Third,SRSweretheruleandARSverymuchtheexception.AnSRSsystemisheredefinedasonethatensuresthattheovernightrateisabovetheinterestrateonbankreserves(possiblyzero);andanARSasonewherethatinterestrate(orzero)isthe

binding“floor”fortheovernightrate–typicallyimplementedthroughadepositfacility.

7

Moreprecisely,inanSRS,thefactordeterminingtheovernightrateisthedemandforreservesforsettlementpurposes(“settlementbalances”),possibly

constrainedbyreserverequirementswithaveragingprovisions.Bycontrast,inanARSreservesexceedthatamount.ThehandfulofcentralbanksthathadanARS–infact,

2Foradetailedandsystematiccomparisonofoperatingproceduresatthetime,seeBorio(1997)and

(2001).TheproceduresdidnotchangesignificantlyuntiltheGFC,whenadjustmentsstartedtobemade(BorioandNelson(2008)).Ho(2008)comparesoperatingproceduresinselectedcountriesin

Asia.Forashortoverviewofcurrentsystems,seeCapetal(2020)andtheMarketsCommitteeCompendiumontheBISwebsite:

/mc/compendium.htm

.

3TheSwissNationalBankwasanexception,asittargetedthree-monthLibor,giventhestructuralfeaturesofthemoneymarket.

4Thecriticalimportanceofsignallinginpracticalimplementationislostinstandardformalmodelsofoperatingprocedures,wherecontroloftheovernightrateisportrayedasaverticalsupplycurvehittingasmoothandwellbehaveddownwards-slopingdemandcurve.Compare,forinstance,Borio

(1997)andBorioandDisyatat(2010),Bindseil(2004)andWoodford(2000)withBechandMonnet

(2013).Inthelatterclassofmodels,whichhavebecomeincreasinglystandard,signallinghasnotmuchofaroletoplayandliquiditymanagementoperationsdothebulkofthework.Borio(1997)alsoincludesadetaileddiscussionoftheroleofaveragingprovisionsandtheirlinkwithsignalling.SeealsoFriedmanandKuttner(2010).

5Thisessentiallymeantoffsettingtheimpactofautonomousfactorsonthesupplyofreservesandpossiblysmoothingoutthedemandforsettlementbalancesthemselves,throughegreserverequirementswithaveragingprovisions.

6Thisdefinitionofthe“decouplingprinciple”isnotusedtorefertothepossibilityofadjustingtheamountofreservesandthepolicyrate/operatingtargetindependently,whichisapropertyofafloorsystem.

7Thisdoesnotmean,though,thattheovernightratewillnecessarilybeatthefloor.Inparticular,itmaybebelow–floorsmay“leak”(seebelow).Manycentralbankshadnodepositfacilityinthepast,withtheFederalReservepre-GFCbeingacaseinpoint.

4

onlytwo(NewZealandandNorway),atleastamongadvancedeconomies–didsatiatethedemandforsettlementbalances,butonlymarginally.

Tobesure,beneaththesesimilarities,differencesabounded–thinkofthemas“ahundredwaystoskinacat”(Borio(2001)).But,lookingback,thesimilaritiesprevailed.Andthosedifferencesmadehardlyanydifference.

Operatingproceduresweresimpleandtidy.

Fast-forwardtotodayandthesea-changeisobvious,atleastinseveralAEs.Inmanyrespects,thecurrentfeaturesarethemirrorimageofthepre-GFCones.

First,centralbankscannolongercapturethepolicystancewithasingle(overnight)operatingtarget.Becauseoftheirlarge-scaleassetpurchasesandspeciallendingschemes,theyhaveextendedtheirdirectinfluencewellbeyondtheovernightsegment.

Second,goneisthedecouplingprinciple.Liquiditymanagementoperationsareanintegralpartofthepolicystance.Andwhencentralbankstriedtorescuetheprincipleastheystarted,orconsideredstarting,tounwindtheirbalancesheets,itprovedveryhard.Recallhowshrinkingthebalancesheetwassupposedtobe“asboringasseeingpaintdry”.Well,ithasnotbeen.

Third,manycentralbankshaveadoptedARS.Inseveralcasesreservesaremuchlargerthananyconceivableliquidityneeds.Asaresult,theyarenolongerjustapaymentsorsettlementmediumbutalsoastoreofvalue,competingwithotherassetsintermsofremuneration.

Weknowthereasonfortheshift:thehugeandunsterilisedincreaseincentralbankbalancesheets,whichwasdesignedtoeasefurtherthepolicystanceatthezero,oreffective,lowerboundortoaddressfinancialstress.Largescaleassetpurchases–oftentermed,tooloosely,quantitativeeasing(QE)–haveaccountedforthelion’sshareoftheincrease.

8

Asaresult,centralbankbalancesheetshavereachedlevelspreviouslyseenonlyinwartime.

9

Thesea-changehasgonehandinhandwithanotherremarkabledevelopment–

widespreadmarketsegmentation.Goneistheseamlessalignmentofmarketrateswiththe(uncollateralised)overnightrate:somearbitragerelationshipsinovernightandtermmoneymarketsegmentshaveseeminglybrokendown.

10

8Insomecases,though,themaincounterpartwasincreasesinforeignexchangereserves–large-scalepurchasesinforeigncurrency-denominatedassets–whichareanotherformofbalancesheetpolicy(BorioandDisyatat(2010)).Thisismorecommoninemergingmarketeconomies(EMEs);amongadvancedeconomies,theSwissNationalBankisanexample.

9ForthosecountriesthathadadoptedARSpre-GFC,themotivationsweredifferent.InthecaseofNorway,itwastheimpactofhugeandunpredictableautonomousfactors,intheformofgovernmentbalanceswiththecentralbank.InthatofNewZealand,thereasonsweremore“philosophical”,iefollowingFriedman’sprinciplethatifproducingmoneyiscostless,thenitsopportunitycostshouldbezero.SeealsoGoodfriend(2002)foranadvocateofthisimplementationapproach.

10SeeegDuffieandKrishnamurthy(2016)onhowdispersionacrossmoneymarketratesduetosegmentationhampersthepass-throughefficiencyofpolicyratechanges.SeeBorioetal(2016)andRimeetal(2022)onhowthefrictionsinmoneymarketsspillovertoFXswapmarketsandcontributetoviolationsincoveredinterestparity(CIP).

5

Examplesabound.Marketratesmaylanguishbelowthedepositfacilityrate–“floorsmayleak”.Collateralisedratesmayhoverwellbelowuncollateralisedones,byanamountthatexceedsanypossibledifferenceincreditrisk–asymptomofcollateralscarcity.Andsomespreadsthatusedtobestablemaynowbemorevolatile.

Continueorreversecourse?

Wheredowe(orshouldwe)gofromhere?Intalkingtocentralbanks,theimpressionisthattheyarebecomingusedtoARS.ARShavebecomeakindof“NewNormal”,linkedtolargercentralbankbalancesheets.

ThereareessentiallyfourargumentsforretainingARSs.

Argumentone:thefloorsystemdoesitsjob.Thecentralbankdoesmanagetocontroltheovernightratewiththedesireddegreeofprecision,inbothgoodandbadtimes.

11

Tobesure,thedegreeofcontrolmaynotbeperfect.Buttheratehovers

roughlywherethecentralbankwouldliketoseeitanditsvolatilityisgenerallylowandacceptable.Simplyput,ifitain’tbroken,whyfixit.

Argumenttwo:intheNewNormal,itwouldbehardtoimplementanSRS.Thisisbecausethedemandforreserveshasbecomelesspredictable.Sometimes,there

maybetensionsandspikesintheovernightandothercloselyrelatedmarketrates,suchasthereporate.ThemoneymarketructionsinSeptember2019

12

arethemostnotoriousexample:theyshowedthat,despiteverylargereserves,therewasnoexcess

afterall.Asaresult,centralbankshavebeencautiouslytestingthewatersastheyunwindtheirbalancesheets.

Variousreasonshavebeenputforwardtoexplainthisunpredictabilityinthedemandforreserves.Centralbankshavebroadenedthesetofcounterparties,includingcentralclearingcounterparties(CCPs).

13

Thereisgreatersegmentationin

the(securedandunsecured)interbankmarketandprobablybeyond.Importantly,newprudentialliquidityrequirementsarenowinplace:settlementbalances,possiblyconstrainedbyreserverequirements,arenolongertheonlyfactordeterminingtheneedfordepositswiththecentralbank.Itisasifthesedepositsnowhavetoobeytwomasters:themonetaryauthorityandtheprudentialauthority.

Argumentthree:abundantreserveshavetheadditionalbenefitofsupporting

financialstability.Regardlessofprudentialrequirements,theyprovidebankswithampleliquiditybuffers.Moreover,ifonebelievesthatthereisascarcityofsafeassets,thenbankreservesareanadditionalsourceofsupply.

14

11Ingeneral,thedesireddegreeofprecisionandacceptabledeviationscanvary,dependingonthespecificsofthesystemandbroaderaspectsofthefinancialsystem.Foradiscussion,seeBorio(1997)and(2001).

12Foramoredetailedanalysisofthisepisode,seeegAvalosetal(2019),Afonsoetal(2021)andCopelandetal(2022).

13See,forexample,thecaseoftheUnitedKingdom(Hauser(2019)).

14Foranelaborationofthisview,seeGreenwoodetal(2016).

6

Argumentfour:regardlessoftherelativemeritsofthesystem,thequestionofwhichsystemtoadoptisratherpremature.Noreasontothinkaboutchanging,atleastnow.Insomejurisdictions,itwilltakealongtimetoreducecentralbankbalancesheets.

Nodoubt,theseargumentshavemerit.Buttheyarenotthatcompelling.Takeeachinturn.

Argumentone:thesystemhasindeed“worked”insensethatithasyieldedcontrolovertheovernightrate.Thatsaid,ithasnotcomewithoutcosts.

Directlyorindirectly,thesecostsreflectakeyfactor:reserveshavealsobecomeastoreofvalue.Intheprocess,thecentralbankhasswitchedoffthesignallingmechanismofcontrol:nowitisliquiditymanagementoperationsthatdoalltheheavylifting.Moreover,thecentralbankhastakenovermuchoftheintermediationintheovernightinterbankmarket.Asaresult,manyoftheunwelcomefeaturesofthefinanciallandscapethatwemaybetemptedtotreatasexogenousmaywellbe,toasignificantextent,endogenous,ietheconsequenceoftheARSsystemitself.

Threetypesofcostareworthhighlighting.

OneisthattheARSkillstheovernightinterbankmarket(Graph1).Andthedamagecaneasilyextendbeyondtheovernighttenor:ifbanksexpecttohavesufficientliquidityalsointhefuture,itisnotobviouswhytheyshouldtradewitheachotherforfundingpurposesbeyondtheovernightsegmenteither.

15

,

16

Thedamageislong-lasting.

17

Ifyoudon’tuseamuscle,itatrophies.Desksaredismantled.

Institutionalmemorywithers.Inthemeantime,notjustthetotalamountofreserves,buttheirdistributionbeginstomatter.

Theconsequencesarematerial.Forone,thisraisesthelikelihoodoftensionswhenreservesneedtocirculatefreely,aswesawintheUSmarketsinSeptember2019.Asaresult,itwillrequirethecentralbanktoincreaseitsinjectionsofliquiditytocalmmarketsattimesofstress,ultimatelymagnifyingmoralhazard.

18

Inaddition,thereisariskofaratcheteffect:thelongertheARSstaysinplace,thegreaterthedemandforreservescanbecome.

19

VariantsofsuchconcernshaveledtheCentral

15Potter(2016),forinstance,arguesthatthefunctionoftheovernightsegmentissimplytoredistributereserveslinkedtoarbitrarypaymentpatterns.Assuch,itdoesnotperformausefuleconomicfunctionand,ontop,itabsorbscapitalbyincreasingthesizeofbanks’balancesheetsastheyborrowandlendtoeachother.

16KillingtheovernightmarkethasalsoraisedchallengesfortheshifttonewbenchmarkratesfollowingtheLiborscandal,astheseratesrequireactivetrading(SchrimpfandSushko(2019)).Onemorespecificimplicationisthepressuretohaveabenchmarkratedeterminedinamarketinwhichnon-banksalsoparticipate.This,inturn,mayindirectlybeonereasonforextendingaccesstothecentralbankbalancesheettothem.Seealsobelow.

17Onthis,seealsothereportbytheMarketsCommittee(2019).

18Inthiscontext,Selgin(2019),forinstance,stressestheimportanceofinterbankmonitoringasadiscipliningfactor;Furfine(2001)providesevidencebasedonthe(uncollateralised)overnightsegment.SeealsoCœuré(2013).

19See,forinstance,Nelson(2022)and,forareferencetothispossibility,Åbergetal(2021).Inasimilarvein,Acharyaetal(2022)arguethatlargeexcessreservesinducebankstocreatecommitmentsonthem:thesupplyofliquiditygeneratesitsowndemand.

7

BankofNorwayandtheSwissNationalBanktotakehalfastepbackandadopttieredfloorsystemsandabsorbreserves.

20

ExcessliquidityandthedeclineininterbankmoneymarketactivityGraph1

FederalReserve

USDbn

USDbn

3,400

340

2,550

255

1,700

170

850

85

0

0

0305070911131517192123

Lhs:Excessreserves

Rhs:Unsecuredinterbankvolume(EFFR)

Eurosystem

EURbn

EURbn

4,000

200

3,200

160

2,400

120

1,600

80

800

40

0

0

0305070911131517192123

Lhs:Excessreserves

Rhs:Unsecuredinterbankvolume(EONIA)

Securedvolumeforfundingpurposes(GCpooling)

Theverticallineintheleft-handpanelindicatesthestartofreserveremunerationbytheFederalReserve,whichmarkedtheswitchtoafloorsystem.Themarketfortheeffectivefederalfundsrateincludesparticipantsthatarenoteligibletoreceiveinterestonreserves.Theverticallineintheright-handpanelcorrespondstowhenEONIAconvergedtothedepositfacilityrate,whenexcessreservesroseasaresultoftheEurosystem’sPublicSectorPurchaseProgramme(PSPP).

Sources:BoardofGovernorsoftheFederalReserveSystem;Bloomberg;BIS.

Asecond,closelyrelated,costisthedistortionsthattheARSsystemcanintroduceinmarkets.Itcancontributetocollateralscarcity:afterall,onlybankscanusereserves.Collateralscarcityhasbeenanissueintheeuroarea.

21

Moreover,itcan

contributetopriceanomalies,suchasleakingfloors.Astheovernightratehitsthefloor,theimpactofsegmentationduetoinstitution-specificfeaturesincreases.Givennoorlittletradingamongbanks,newplayersbecomethemarginalones,defactosettingtheinterestrate.Think,forinstance,ofthoseinstitutionsintheUnitedStatesthathaveaccesstocentralbankdepositsbutarenoteligibleforinterestonthem.

Buttheissueismoregeneral.Oncereservesbecomeastoreofvalue,theycantriggerpervasive,possiblyunpredictablewavesacrossrelativeyieldsinthe

financialsystem.Thereasonisthattheamountexogenouslysetbythecentralbankmustbewillinglyheldattheexogenouslysetinterestrate.

22

Astheexcessincreases,totheextentthatbanksfindreservescostly–egbecausetheycrowd

20Inthesesystems,reservesareremuneratedonlyuptoapre-determinedamountandthecentralbankkeepsthesupplyofreservesclosetothatpoint.Thisinducesacertainamountofinterbanktrading,wheneversomebanksarebeyondthethresholdandothersbelowit.OnNorway,seeCentralBankofNorway(2021);onSwitzerland,seeMaechlerandMoser(2022).

21Foradiscussionoftheseissues,seeegArrataetal(2020),Schaffneretal(2019).

22Indeed,thesearepreciselythetypesofeffectdiscussedinTobinandBrainard(1969),whereanopenmarketoperationexchangesagovernmentdebtforazero-yieldingmonetarybase.

8

outmoreprofitableinvestments,suchasbyconsumingcapital–attemptstogetridofthemwillputdownwardpressureonotheryields.

Dependingoncountry-specificfeatures,thedownwardpressurecouldreachuncomfortablelevels,possiblytothepointofcallingforfurtheradjustmentstotheframework.Thisisespeciallythecaseattimeswhenbanksarereluctanttogrowtheirbalancesheet–its“price”ishigh.Non-bankswouldlookforalternativeinvestmentopportunities,mostlikelypushingdowntheratesontheclosestsubstitutes,suchasreversereporates.

23

Inadditiontothecriticalroleofmorestructuralfactors,

24

thismayhelpexplainthesharpdownwardspikesonreporatesintheeuroareaatquarterendsandtheutilisationofthenewreverserepofacilityintheUnitedStates–akindofsafetyvalve.

25

Onecanlookatitanotherway.InanSRS,wherethedemandforreservesispurelyforsettlementpurposes,andsignallingdoestheheavylifting,theimpactoftheimplementationframeworkislimitedtothecorrespondingovernightrate.Thedecouplingprinciplereigns.InanARS,theimpactcannotbecontainedinthesameway.ParaphrasingJeremyStein,excessliquiditygetsinallthecracks(Stein(2013)).

Athirdtypeofcostisofamorepoliticaleconomynature.Itistheperceptionthatthecentralbank“subsidises”banks.

26

Thecentralbankcanthenbecomean

easytargetforcriticism,asisalreadythecase,especiallyifbanksarereluctanttooffermoreattractiveratestodepositors.Afterall,whyshouldtheyiftheyhaveplentyofliquidity,sothattheyarelesspressedforfunds,andiftheircapital,andhencelendingcapacity,isabsorbedbyanunwanteditemontheirbalancesheet?Thissubsidyquestionispartofabroaderconcernwithcentralbankfinancialresults.

Argumenttwo:itishardtoimaginethat,becauseofinstabilityinthedemandforreserves,anSRSwouldbemoredifficulttooperatethaninthepast–or,perhapsoneshouldsay,notaseasy.Theoverwhelmingmajorityofcentralbanksaroundtheworldarestilloperatingsuchasystemandwithoutdifficulties.Thisissoevenwhentheyhavelargebalancesheets,mainlyreflectingholdingsofforeignexchangereserves,asinmanyEMEs.And,ofcourse,theyareoperatingthesystemsfollowingtheimplementationofthenewBaselIIIprudentialrequirements.Someoftheconcernsmaysimplyreflectthelossofinstitutional

23Onthis,seealsoMarketsCommittee(2019).

24Apervasivestructuralfactorhasbeenchangesinprudentialregulationandsupervision,internationallyanddomestically.ForadetailedanalysisoftheUSexperience,seeegPotter(2017),whoalsoexplainstherationalefortheintroductionofthefacilityinthoseterms.Foracross-countryperspective,seeCGFS(2015).

25