In normal conditions, when financial markets function properly, the size of the central bank balance sheet would be such that the overnight rate would coincide with the short term refinancing rate of the central bank and excess reserves are negligible.
Under stress, the size of the central bank balance sheet would increase, on the basis of banks’ increased demand for excess reserves, to the point that the overnight rate would be lower than the short term main refinancing rate. Another aspect of such a policy relates to the quality of the collateral.