The Effects of Liquidity Regulation on Bank Demand in Monetary Policy Operations

53 Pages Posted: 23 May 2016 Last revised: 24 Oct 2018

See all articles by Marcelo Rezende

Marcelo Rezende

Board of Governors of the Federal Reserve System

Mary-Frances Styczynski

Board of Governors of the Federal Reserve System

Cindy M. Vojtech

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2018

Abstract

We estimate the effects of the liquidity coverage ratio (LCR), a liquidity requirement for banks, on the tenders that banks submit in Term Deposit Facility operations, a Federal Reserve tool created to manage the quantity of central bank reserves. We identify these effects using variation in LCR requirements across banks and a change over time that allowed term deposits to count toward the LCR. Banks subject to the LCR submit tenders more often and submit larger tenders than exempt banks when term deposits qualify for the LCR. These results suggest that liquidity regulation affects bank demand in monetary policy operations.

Keywords: Liquidity Coverage Ratio, Term Deposit Facility, Monetary Policy, Excess Reserves, Basel III

JEL Classification: E52, E58, G21, G28

Suggested Citation

Rezende, Marcelo and Styczynski, Mary-Frances and Vojtech, Cindy M., The Effects of Liquidity Regulation on Bank Demand in Monetary Policy Operations (October 12, 2018). Available at SSRN: https://ssrn.com/abstract=2782620 or http://dx.doi.org/10.2139/ssrn.2782620

Marcelo Rezende (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Mary-Frances Styczynski

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Cindy M. Vojtech

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/cindy-m-vojtech.htm

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
105
Abstract Views
816
rank
228,540
PlumX Metrics