Authors: Gara Afonso, Marco Cipriani, and Gabriele La Spada
At the New York Fed, our mission is to make the U.S. economy stronger and the financial system more stable for all segments of society. We do this by executing monetary policy, providing financial services, supervising banks and conducting research and providing expertise on issues that impact the nation and communities we serve.
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
Do you have a request for information and records? Learn how to submit it.
Learn about the history of the New York Fed and central banking in the United States through articles, speeches, photos and video.
As part of our core mission, we supervise and regulate financial institutions in the Second District. Our primary objective is to maintain a safe and competitive U.S. and global banking system.
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
Need to file a report with the New York Fed? Here are all of the forms, instructions and other information related to regulatory and statistical reporting in one spot.
The New York Fed works to protect consumers as well as provides information and resources on how to avoid and report specific scams.
The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.
The New York Fed has been working with tri-party repo market participants to make changes to improve the resiliency of the market to financial stress.
We are connecting emerging solutions with funding in three areas—health, household financial stability, and climate—to improve life for underserved communities. Learn more by reading our strategy.
The Economic Inequality & Equitable Growth hub is a collection of research, analysis and convenings to help better understand economic inequality.
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
JEL classification: G10, G21, E41, E51, E58
Authors: Gara Afonso, Marco Cipriani, and Gabriele La Spada
Using a quasi-natural experiment, we show that quantitative easing (QE) interacts with bank regulation by increasing banks’ balance-sheet costs and, in turn, impacting both the size and portfolio choices of non-banks. During 2020-21, the Federal Reserve grew its balance sheet by $4.6 trillion, increasing bank reserves, deposits, and leverage. Concurrently, regulators provided Supplementary Leverage Ratio (SLR) relief to banks. Upon expiration of this relief in March 2021, banks had an incentive to shrink their balance sheets to reduce leverage. We show that around that time, money market funds (MMFs) affiliated with banks subject to the SLR experienced large inflows, as these banks shed deposits to save on balance-sheet space, pushing them into affiliated, off-balance-sheet funds. Moreover, MMFs with limited investment options shifted their portfolios toward the Overnight Reverse Repo (ONRRP) facility, a program through which MMFs invest with the Federal Reserve, as banks reduced their supply of wholesale debt. These two effects explain the dramatic increase in ONRRP take-up, which reached $2.4 trillion in 2022. The impact of banks’ balance-sheet costs on MMFs’ ONRRP investment is robust to controlling for the effects of interest-rate uncertainty and T-bill supply. Our results imply that when non-banks can access the central-bank balance sheet, they end up holding a share of central-bank liabilities, draining reserves and attenuating the impact of QE. When only banks have access, they must hold all the liquidity injected by the central bank, which limits their balance-sheet space; in this case, QE may increase non-bank intermediation, hindering financial stability.