Figure 1: Time Series of Aggregate Trading Volumes in Fed Funds Market
This figure displays borrowing dynamics in the fed funds market for
domestic and foreign banks. Source: FR 2420 Report on Selected Money
Market Rates
This figure contains two stacked line charts covering 2016 through early 2024. The top panel shows federal funds borrowing volumes (in billions of dollars) for four groups: domestic banks borrowing from banks (blue), domestic banks borrowing from nonbanks (red), foreign banks borrowing from banks (yellow), and foreign banks borrowing from nonbanks (green). A gray shaded region from roughly March 2020 through early 2022 denotes the Zero Lower Bound period. Across the sample, foreign banks borrowing from nonbanks (green) account for the largest volumes, fluctuating roughly between 35 and 110 billion dollars. Domestic borrowing volumes are much smaller, generally below 20 billion dollars, and decline noticeably during the Zero Lower Bound period before rising again in 2022–2023. The bottom panel shows borrowing spreads to IORB (in percentage points) for the same four groups over the same time period, with the same Zero Lower Bound shading. Most spreads remain within approximately −0.2 to +0.2 percentage points. Domestic banks borrowing from banks (blue) rise to positive spreads around 2019, decline toward zero or slightly negative values during the Zero Lower Bound period, and increase again in 2022–2023. Domestic and foreign banks borrowing from nonbanks (red and green) are generally near zero or slightly negative throughout. Foreign banks borrowing from banks (yellow) exhibit the greatest volatility in spreads, with intermittent spikes reaching as high as 0.6 percentage points, particularly in 2023–2024. Overall, the figure shows that foreign banks borrowing from nonbanks dominate in volume, while spreads to IORB are typically small in magnitude except for episodic spikes in the foreign-bank-to-bank segment.
Figure 2: Rates and Volumes Borrowed by Domestic Bank in the Fed Funds
Market
This figure displays cumulative average trading volumes and spreads
in the fed funds market for domestic banks. Each volume/spread dot
reflects at least 7 domestic banks’ trading behavior averaged across our
sample between October 2015 and January 2024. This figure does not
single out trading behavior on a particular day, but represents average
trading behavior between October 2015 and January 2024. Blue dots
represent the cumulative trading volume lent by bank lenders. Red dots
represent the cumulative trading volume lent by non-bank lenders.
Source: FR 2420 Report on Selected Money Market Rates
This figure is a scatter plot showing the relationship between average cumulative borrowing volume (x-axis, in billions of dollars) and the spread to IORB (y-axis, in percentage points) for domestic banks. Each point reflects the average trading behavior of at least seven domestic banks over the full sample period. Blue dots represent borrowing from bank lenders, and red dots represent borrowing from nonbank lenders. The figure shows a generally upward-sloping relationship between cumulative volume and spreads. At low volumes (near 0–2 billion dollars), spreads are negative, reaching roughly −0.4 percentage points at the smallest volumes. As cumulative volume increases to about 5–10 billion dollars, spreads move toward zero. At higher volumes (above roughly 11–12 billion dollars), spreads become positive and rise sharply, reaching up to about 1 percentage point for the largest observed volumes. Overall, the chart indicates that domestic banks borrowing larger cumulative amounts tend to pay higher spreads relative to IORB, with a nonlinear pattern in which spreads increase gradually at moderate volumes and more steeply at the highest volume levels.
Figure 3: EFFR and Aggregate Reserves
This figure displays the Effective Federal Funds Rate minus IORB and
system-wide reserves divided by total banking assets in the financial
system between October 2015 and January 2024. Source: Federal Reserve
Bank of New York, FR H.4.1 Factors Affecting Reserve Balances, FR H.8
Assets & Liabilities of Commercial Banks in the US
This figure plots two time series from October 2015 to January 2024. The blue solid line shows the spread between the Effective Federal Funds Rate (EFFR) and the Interest on Reserves rate (IOR), measured in basis points on the right axis. The red dashed line shows aggregate reserves divided by total banking system assets, measured in percent on the left axis. Vertical dashed lines mark key events labeled “Repo Spike” (2019), “COVID” (2020), and “SVB” (2023). From 2015 to 2019, reserves as a share of assets (red line) decline steadily, reaching a low around the time of the 2019 repo spike. Over the same period, the EFFR–IOR spread (blue line) fluctuates modestly but shows occasional downward spikes. In 2020, reserves rise sharply following the onset of COVID, peaking in 2021 before gradually declining through 2022 and 2023. Around the same time, the EFFR–IOR spread briefly increases during the repo spike and again during early 2020, then remains close to zero or slightly negative for most of the subsequent period. Overall, the figure shows an inverse co-movement around key stress episodes: reserves fall prior to the 2019 repo spike and surge during COVID, while the EFFR–IOR spread exhibits temporary volatility during stress events but remains relatively contained in magnitude outside those episodes.
Figure 4: Rates Offered by Lender Type and Aggregate Reserves
This figure displays the volume-weighted average lending rate offered
by non-banks (purple line) and banks (yellow line) minus IORB,
respectively, and system-wide reserves divided by total banking assets
in the financial system between October 2015 and January 2024. Source:
FR 2420 Selected Money Market Rates, FR H.4.1 Factors Affecting Reserve
Balances, FR H.8 Assets & Liabilities of Commercial Banks in the
US
This figure presents three time series from October 2015 to January 2024. The purple line shows the non-bank volume-weighted average rate (VWAP) minus IOR (right axis, basis points), and the yellow line shows the bank VWAP minus IOR (right axis). The red dashed line shows aggregate reserves divided by total banking system assets (left axis, percent). Vertical dashed lines mark the 2019 repo spike, the onset of COVID in 2020, and the SVB episode in 2023. From 2015 to 2019, reserves (red dashed line) decline steadily, reaching a low around the repo spike. Over the same period, both bank and non-bank lending rates relative to IOR trend upward, with the bank rate (yellow) generally above the non-bank rate (purple). During the repo spike and again around early 2020, both rate series show sharp temporary increases. Following the onset of COVID, reserves rise sharply and peak in 2021, while spreads relative to IOR decline and remain closer to zero. From 2022 through 2023, reserves gradually fall, and bank rates relative to IOR increase again, with noticeable volatility around the SVB episode. Throughout the sample, bank-offered rates tend to exceed non-bank-offered rates, and periods of lower reserve levels coincide with higher spreads relative to IOR.
Figure 5: Reserves to Deposits across Domestic Banks
Histograms of domestic banks’ reserves to deposit ratios, separated
by small sized banks (less than $10 billion in assets), and medium and
large sized banks (greater than $10 billion). Source: FR 2900 Report of
Deposits and Vault Cash, internal Federal Reserve accounting records
This figure presents three histograms showing the distribution of reserves-to-deposits ratios across domestic banks. The top-left panel shows all banks, the top-right panel shows small banks (less than $10 billion in assets), and the bottom-left panel shows medium and large banks (greater than $10 billion in assets). The horizontal axis in each panel shows the reserves-to-deposits ratio (ranging from 0 to 1), and the vertical axis shows frequency. For all banks, the distribution is heavily concentrated at low reserve-to-deposit ratios, with the highest frequency near zero and progressively fewer banks at higher ratios. Small banks exhibit a similar pattern, with a large mass of observations at low ratios and a long right tail extending toward 1. Medium and large banks also display a right-skewed distribution, but the frequencies are more evenly spread across higher ratios relative to small banks. Overall, the figure indicates that most domestic banks hold low reserves relative to deposits, with small banks more concentrated at very low ratios, while medium and large banks are somewhat more dispersed across higher reserve-to-deposit levels.
Figure 6: Aggregate Reserves and Deposits per Bank Size to GDP
This figure displays aggregate reserves balances as a fraction of GDP
and aggregate deposits of banks by bank size to GDP. Small banks are
banks with less than $10 billion in assets. Large banks have assets
greater than $100 billion in assets. Source: FR 2900 Report of Deposits
and Vault Cash, FFIEC Call Reports, FR H.4.1 Factors Affecting Reserve
Balances, internal Federal Reserve accounting records
This figure presents three histograms showing the distribution of reserves-to-deposits ratios across domestic banks. The top-left panel shows all banks, the top-right panel shows small banks (less than $10 billion in assets), and the bottom-left panel shows medium and large banks (greater than $10 billion in assets). The horizontal axis in each panel shows the reserves-to-deposits ratio (ranging from 0 to 1), and the vertical axis shows frequency. For all banks, the distribution is heavily concentrated at low reserve-to-deposit ratios, with the highest frequency near zero and progressively fewer banks at higher ratios. Small banks exhibit a similar pattern, with a large mass of observations at low ratios and a long right tail extending toward 1. Medium and large banks also display a right-skewed distribution, but the frequencies are more evenly spread across higher ratios relative to small banks. Overall, the figure indicates that most domestic banks hold low reserves relative to deposits, with small banks more concentrated at very low ratios, while medium and large banks are somewhat more dispersed across higher reserve-to-deposit levels.
Figure 7: Theoretical Demand and Supply Curves in the Fed Funds Market
Vertical axis is spread of fed funds rate to IORB, horizontal line is
trading volumes in the fed funds market. Red and blue lines depict
supply in the fed funds market by non-bank and banks, respectively.
Black solid line depicts demand in the fed funds market, dashed black
lines depicts demand after a deposit shock.
This figure presents a stylized supply and demand diagram for the federal funds market. The vertical axis measures the spread of the federal funds rate relative to IORB (FF − IORB), and the horizontal axis measures trading quantity (volume). The black solid curve represents the demand for fed funds, which slopes downward. The dashed black curve shows demand after a deposit shock, shifting upward relative to the original demand curve. Supply is depicted by two segments: a red horizontal line representing non-bank supply at a fixed spread, and a blue upward-sloping curve representing bank supply. The intersection of demand and supply determines the equilibrium spread and quantity. A vertical dashed line marks the change in equilibrium quantity (ΔQ), and a horizontal dashed line marks the corresponding change in the spread (Δ(FF − IORB)). The figure illustrates that a rightward or upward shift in demand (e.g., following a deposit shock) increases both the equilibrium trading volume and the spread relative to IORB, particularly where supply from banks is upward sloping.
Figure 8: Rates Offered by Lender Type and Bankers’ Bank Reserves
This figure displays the volume-weighted average lending rate offered
by non-banks (purple line) and banks (yellow line) minus IORB,
respectively, and system-wide reserves divided by total banking assets
in the financial system between October 2015 and January 2024. Source:
FR 2420 Selected Money Market Rates, FFIEC Call Reports.
This figure shows three time series from October 2015 to January 2024. The purple line represents the non-bank volume-weighted average rate (VWAP) minus IOR (right axis, in basis points), and the yellow line represents the bank VWAP minus IOR (right axis). The green dashed line shows bankers’ bank reserves as a share of total banking assets (left axis, in percent). Vertical dashed lines mark the 2019 repo spike, the onset of COVID in 2020, and the SVB episode in 2023. From 2015 to 2019, bankers’ bank reserves decline as a share of assets, while both bank and non-bank lending spreads relative to IOR trend upward, with bank spreads generally exceeding non-bank spreads. Around the repo spike and again at the onset of COVID, both rate series exhibit temporary increases. In 2020–2021, bankers’ bank reserves rise sharply and peak, while spreads decline toward zero. From 2022 through 2023, bankers’ bank reserves fall, and bank spreads relative to IOR increase again, with noticeable volatility around the SVB episode. Throughout the sample, higher spreads tend to coincide with lower levels of bankers’ bank reserves relative to assets.
Figure 9: Estimate of Supply Elasticity for Small Domestic Banks as a Function
of Reserves to Bank Assets
This figure illustrates how reserve ratios influence our estimated
supply elasticity from the two‐stage IV regression of equation 5. In the top
panel, the blue line shows the total bank-lender elasticity $\gamma'_{1} +
\gamma'_{3}\frac{Reserves}{BanksAssets}_t$ plotted over the range
of the aggregate reserve‐to‐assets ratio $\frac{Reserves}{BanksAssets}_t$. These
curves use the coefficients from Table 5
for both banks and non‐bank lenders. In the bottom panel, we replace the
aggregate ratio with the bankers’ banks reserve ratio $\frac{Bankers'\:Banks\:Reserves}{Bankers'\:Banks\:Assets}_t$,
again plotting the sum of the baseline elasticity and its interaction
term using the point estimates from Table 6.
This panel highlights that bank supply elasticity is far more sensitive
to bankers’ banks’ reserves than to system‐wide reserves, while non‐bank
elasticity remains essentially flat. The shaded area illustrates the
confidence intervals of our elasticity measure at the 95th percentile.
Source: FR 2420 Report of Selected Money Market Rates, FR 2900 Report of
Deposits and Vault Cash, FR H.4.1 Factors Affecting Reserve Balances, FR
H.8 Assets & Liabilities of Commercial Banks in the US, FFIEC Call
Reports, internal Federal Reserve accounting records.
This figure contains two panels showing how estimated supply elasticities in the federal funds market vary with reserve ratios. In both panels, the vertical axis measures supply elasticity, and shaded bands represent 95 percent confidence intervals. In the top panel, elasticity is plotted against aggregate reserves as a share of total bank assets. The blue line (bank lenders) slopes downward, indicating that bank supply elasticity declines as aggregate reserves increase. The dashed line (non-bank lenders) remains relatively flat and close to zero across reserve levels, indicating little sensitivity of non-bank elasticity to aggregate reserves. In the bottom panel, bank supply elasticity is plotted against bankers’ bank reserves as a share of assets. The downward-sloping line shows that bank elasticity declines more steeply as bankers’ bank reserve ratios rise. Overall, the figure indicates that bank supply elasticity is negatively related to reserve ratios—especially bankers’ bank reserves—while non-bank elasticity remains comparatively stable.
Figure A.1: Rates and Volumes Borrowed by Domestic and Foreign Bank in the Fed
Funds Market.
This figure displays cumulative average trading volumes and spreads
in the fed funds market for domestic banks (left) and foreign banks
(right). Each volume/spread dot on the left panel for domestic banks
reflects at least 7 banks’ trading behavior averaged across our sample
between October 2015 and January 2024. Each volume/spread dot on the
right panel for foreign banks reflects at least 5 banks’ trading
behavior averaged across our sample between October 2015 and January
2024. Both panels do not single out trading behavior on a particular day
but represent average trading behavior between October 2015 and January
2024. Blue and yellow dots represent the cumulative trading volume lent
by bank lenders. Red and green dots represent the cumulative trading
volume lent by non-bank lenders. Source: FR 2420 Report on Selected
Money Market Rates
This figure contains two scatter plots showing the relationship between average cumulative borrowing volume (horizontal axis, in billions of dollars) and the spread to IORB (vertical axis) for domestic banks (left panel) and foreign banks (right panel). Each point reflects the average trading behavior of at least five banks over the sample period from October 2015 to January 2024. In the domestic panel, blue dots represent borrowing from bank lenders and red dots represent borrowing from non-bank lenders. In the foreign panel, yellow dots represent borrowing from bank lenders and green dots represent borrowing from non-bank lenders. In both panels, spreads tend to increase as cumulative borrowing volume rises. For domestic banks, spreads are negative at very low volumes, move toward zero at moderate volumes, and increase sharply at the highest volumes. For foreign banks, a similar upward-sloping relationship appears, with spreads rising markedly at high borrowing levels, particularly for borrowing from bank lenders. Overall, the figure indicates a positive relationship between borrowing volume and spreads relative to IORB for both domestic and foreign banks, consistent with upward-sloping supply in the federal funds market.