While these frictions may vary over time, they should generally do so only slowly. 7 The pull of IOER should also be affected by the quantity of reserves in the system. An increase in bank reserves that increases bank assets makes regulatory leverage ratios more binding, raising the shadow marginal cost of bank balance sheets. It also accentuates the competitive frictions I described above, and reduces individual bank demand for additional reserves. 8 As a result, as the level of reserves declines during normalization, marginal balance sheet costs should fall, competitive frictions should lessen, and the demand for additional reserves from individual banks should increase. These factors should strengthen the magnetic attraction of IOER and pull the fed funds rate and other market rates up toward – and at some point equal to or above – the IOER rate. However, excess reserves will remain plentiful for some time, and while that’s the case the FOMC intends to use an ON RRP facility and other tools as needed to complement IOER in controlling the fed funds rate. 9 When the Desk conducts ON RRPs, as in its current testing program, it sells Treasury securities held in the SOMA with an agreement to buy them back the next business day at a pre-determined price. This leaves the size of the SOMA portfolio unchanged, but shifts some of the liabilities on the Fed’s balance sheet from bank reserves to reverse repos.
The Labuan IBFC's competitiveness will be further enhanced through a revision of the pricing structure pertaining to incorporation and maintenance fee charges. There will be an annual reviews and prices will be revised in response to competitive market developments. The Labuan IBFC will also leverage on the national strategy of the Malaysian Islamic Financial Centre by promoting Syariah-compliant trusts and foundation. These products will complement Islamic financial products and services already available in Kuala Lumpur. Efforts will also be taken to further develop Labuan's captive insurance business which has enjoyed commendable growth over the years. Conclusion Ladies and Gentlemen, The establishment of Labuan as an international offshore financial centre in 1990 was indeed a bold step in its time. We are now seeing the payoffs from this initiative. With the transformation of Labuan as an International Business and Financial Centre, our ambition will be taken further. The new name signals that Labuan is ready to take on the much broader and larger role. The new name also represents a commitment. A commitment for the future. To demonstrate this commitment, the Government and the regulators have put in place the supportive and enabling environment to promote a more connected and more cost effective environment. Continued initiatives will also be taken to remove any impediments and obstacles to a more efficient delivery system and to advance forward the Labuan IBFC. 2  BIS Review 10/2008  The responsibility for ensuring the ambitions of the Labuan IBFC to be realised, is however, a shared responsibility.