5  The interest rate on reserves did not establish a hard floor on the federal funds rate during the short period between the time that payment of interest on reserves was introduced and the FOMC's decision to bring the federal funds rate target close to zero.
Possible reasons were the unfamiliarity of banks with the program, the fact that some institutions are not legally eligible to receive interest on reserve balances and were therefore willing to lend funds in the federal funds market at a rate below the rate paid by the Fed, and the reluctance of banks to use scarce balance sheet space to arbitrage the difference between the federal funds rate and the rate paid on reserves.