As an aside, the water references in liquidity discussions are as pervasive as they are in Pixies’ songs. I discussed some of these issues in a speech last year 1 and there have been two recent publications from two BIS Committees that I am a member of that provide a comprehensive account of recent developments in bond market liquidity globally.
To complement these measures, we raised the Cash Reserve Ratio in successive steps from 5.0 per cent to 7.0 per cent. The measures were so successful that the excess reserves disappeared, with the system even experiencing short bouts of liquidity stress.