RRP on leverage ratio
Hi FedGuy, how does overnight reverse repo solve leverage constraints for the banking system that is full on reserves, if funds are returned the next day? The reserves are returned into the banks banking the MMFs, and the leverage ratio constraints will be even more problematic. So “pushing” away wholesale funding doesn’t really work because the money funds that receive the reserves have their own bank (probably a leverage constrained GSIB) and the reserves only disappear overnight, so each day, banks are still unable to shrink their balance sheet below their leverage ratio requirements?
If you roll over your RRP loan every day then the reserves don't show up up on banking sector's balance sheet. You are right they show up intra-day, but they are gone by the end of the day. So they do not affect leverage ratio.
I see, a technicality! They are calculated EOD.