8 Some of the current conversation about a shortage of safe assets appears not to treat bank reserves or other  central bank liabilities as safe assets. This view comes up particularly with regard to quantitative easing programs, where the claim is made that central bank purchases of sovereign debt reduce the supply of safe assets. This claim is incorrect because the growth of central bank liabilities that fund these purchases are safe assets themselves. I explore these points more deeply in my “Discussion of ‘The Safety Trap’ by Ricardo J. Caballero and Emmanuel Farhi,” remarks at the Bank of Korea International Conference, June 2-3, 2014. 9 In some cases, it may be possible to design instruments with features that help to mitigate any such  undesirable effects. For example, the Federal Reserve’s overnight reverse repurchase agreement (ON RRP) facility has a cap on individual use of $ billion, and from September 22, 2014, through December 16, 2015, ON RRP operations were subject to an overall size limit of $ billion. These issues are discussed in Joshua Frost, Lorie Logan, Antoine Martin, Patrick McCabe, Fabio Natalucci, and Julie Remache, “Overnight RRP Operations as a Monetary Policy Tool: Some Design Considerations,” Federal Reserve Bank of New York Staff Reports, no. 712, February 2015. 10 Financial firms can also issue very short-term commercial paper or certificates of deposit, but these  instruments can also create stability concerns. 11 Importantly, in considering the stability of a bank’s deposits, the LCR distinguishes between operational and  non-operational deposits.
For example, during the money fund reform period, as money flowed from prime to government funds, prime funds used the facility to become more liquid in advance of redemptions and government funds used it to temporarily absorb new investments.31 Finally, the Treasury General Account (TGA) has grown substantially in recent years as the U.S. Treasury has decided to hold a precautionary buffer of cash generally sufficient to cover five business days of outflows, subject to a minimum balance of $ billion. Given the daily variability of TGA balances, this type of account would be also expensive for the private sector to offer under new regulations. Further, as the buffer has been funded mainly through increased bill issuance, it has increased the supply of money-like assets to the private sector. Conclusion Central banks are uniquely able to produce money-like assets that are viewed as safe during non-normal times. In more normal times, regulation and supervision are the best tools to mitigate risks from the private creation of money-like assets, but there is a role for the central bank to use 7 / 10  BIS central bankers' speeches  its balance sheet to smooth fluctuations in the supply and demand for money-like assets. 1  I would like to thank Marco Cipriani, Gabriele La Spada, Deborah Leonard, and Antoine Martin for their assistance in preparing these remarks.