If, however, ON RRPs are offered above the level of money market rates that would be produced by IOER alone given prevailing frictions, ON RRPs should become attractive and help to form a floor for money market rates, either directly through increased take-up that reduces reserves or indirectly through the competitive pressure I described. Since money funds – the majority of the Fed’s ON RRP counterparties – don’t face the same balance sheets costs as banks, the floor formed by ON RRPs should be relatively firm. While ON RRPs are a potentially useful tool for monetary policy control with large amounts of excess reserves, FOMC and market participants have noted the potential for very large regular usage to alter patterns of financial intermediation. Further, a fixed-rate structure with no usage limits could exacerbate liquidity pressures during times of stress. 11 The FOMC recently authorized testing of a cap on the total daily usage of the ON RRPs that could help mitigate these risks. I’ll return to these risks and some ways that they may be mitigated in a bit. In sum, arbitrage activities by banks, complemented as needed by ON RRP operations, should cause a higher IOER rate to lead to higher levels of market rates. However, if the pressure on market rates from the Fed’s administered rates turns out to be insufficient, the Committee has a range of other tools – including term deposits, term RRPs, and asset sales – that could be used to help tighten the stance of policy.
New regulatory acts and key amendments to actual acts on banking supervision approved during 2010 are:   Regulation “On management of risk from open foreign exchange positions”;    Regulation “On risk management in the activity of non-bank institutions”;    Guideline “On conservatorship and liquidation of banks”. *  *  *  Besides the main aspects of the Bank of Albania’s work, such as monetary policy and banking supervision and regulation, the Bank of Albania’s activity was also focused on fulfilment of its other legal obligations and institutional commitments. Sparing the details, I would like to emphasize that the Bank of Albania has done a great job in 2010 for:   Developing and sophisticating the payment system;    Supporting the integration processes of the country, in accordance with our scope of activity;    Enhancing our communication with the public, as an essential instrument to foster transparency and central bank independence;    Further developing the monetary statistics and those of the external sector of the economy;    Strengthening research capacity, in support of analysis and decision-making. All these activities serve the financial system development and support the free market economy in Albania.