Survey of senior financial officers on reserves management

The Federal Reserve Board has posted the results of its most recent survey of senior financial officers (SFOS) at banks about their strategies and practices for managing reserve balances, which was conducted between January 31 and February 14, 2020. The questions in the survey focused on gaining updated information on banks’ demand for reserves and additional information on banks’ engagement in money market activity under three different conditions. The survey:

1. Asked respondents to identify the lowest level of reserve balances that they would be comfortable holding before they began taking active steps to maintain or increase their position
2. Asked whether respondents preferred to hold a minimum end-of-day reserve level in January 2020 that was different from their lowest comfortable level of reserves
3. Asked respondents to indicate the level of reserves above which the risk-adjusted returns of other high-quality liquid assets (HQLA) relative to the interest on excess reserves (IOER) rate would be the primary factor in their willingness to convert additional reserves into other HQLA

The next part of the survey explored respondents’ ability and willingness to lend in overnight wholesale markets (both secured and unsecured). It also asked respondents to elaborate on the factors behind these decisions, the kinds of instruments they used, and the expected risk- adjusted returns relative to the IOER rate at which they were willing to engage in such activity.