20 For a further discussion of the shape of the demand curve for reserves and its implications for policy implementation, see Logan, “Operational Perspectives on Monetary Policy Implementation: Panel Remarks on The Future of the Central Bank Balance Sheet,” May 4, 2018. 8  above-IOR lending remains low as a share of the overnight bank funding market, as shown in Figure 9. 21 I might also expect to see shifts in bank payments behavior—for example, more daylight overdrafts or more effort by banks to “optimize” their payment flows—but I have not seen this either. Most fundamentally, I might have observed a day-to-day relationship between shifts in the stock of reserves and overnight interest rates. Figure 10 shows a scatterplot of daily changes in reserve balances against daily changes in the spread between the IOR rate and the effective federal funds rate; there is no visible relationship. 21  On Oct 24, 2018, there was an increase in the share of federal funds transactions trading above the IOR rate, reflecting an increase in bank borrowing from Federal Home Loan Banks (FHLBs) to manage LCRs, rather than interbank lending. 9  Recent experience supports my belief that we are not at the “steep” portion of the demand curve and aggregate reserve scarcity. On one day in mid-September, there was a large drop in reserves—of nearly $ billion—as the Treasury increased its cash holdings at the Federal Reserve as a result of third-quarter tax receipts, as shown by the red point in Figure 10.
It has clearly emerged from the discussion today that post-trade harmonisation is gaining momentum and achieving concrete results. The example we heard about in more detail is the progress made on the T2S harmonisation agenda. The T2S Community and the post-trade industry have engaged in the implementation of harmonised standards and market practice in areas such as cut-off times, ISO messages, corporate actions processing, account numbering and settlement finality. As Jean-Michel Godeffroy illustrated earlier today, there is an ambitious plan in place for the coming months and a sound record of achievement so far. I noted that the audience expressed moderate optimism that the “priority one harmonisation topics” would be achieved by the launch of T2S. However, there is still a lot of work to be done in order to complete all these projects. It was very interesting in this regard to hear about the experience of Professor Giovannini, whose very name is closely associated with harmonisation and market integration. In particular, he analysed the problems faced by the Giovannini Group in the early 2000s. These reflections are very important for us now to learn from past experiences and to be able to achieve concrete results going forward. The large participation at this conference today, with distinguished speakers and almost 250 participants from all over Europe, is testimony to the joint willingness of both the European and national institutions and market players to achieve post-trade harmonisation, and thus contribute to financial integration in Europe.