I agree that the purposes of the reform have great impact on the financial system's ability to support growth in Israel. These purposes are: a.To reduce the concentration in the financial system and to increase competition in the capital market. b.To reduce the possibility of conflict of interest in the financial system. c.To create significant alternatives to the banking system as sources of finance.
Not only the volume, but also the variation, of demand for central bank funding over time could be affected by the regulation. This might also play a role in determining the appropriate size of open market operations. It’s possible that on some days banks will seek financing from the central bank for regulatory purposes more than they do on other days.