A reduction in securities holdings would have the effect of further reducing the quantity of reserves in the banking system as well as reducing the overall size of the Federal Reserve’s balance sheet. The sequencing of steps and the combination of tools that the Federal Reserve uses as it exits from its currently very accommodative policy stance will depend on economic and financial developments.
Both channels have the advantage of not interfering with the allocation mechanism of a market economy. As the Asset Quality Review is already receiving much attention, thus I will focus the remainder of my talk on the second channel. BIS central bankers’ speeches  1  The benefits of SME loan securitisation Let’s pull together what we know right now.