As a result, the size of the fed funds market has declined relative to pre-crisis levels and the nature of most fed funds activity has changed. Nevertheless, trading volumes remain reasonably robust. Since July 2014, the average overnight borrowing in the fed funds market that banks report to the Fed through our FR 2420 reporting form has been roughly $ billion, with an average of about 300 transactions per day (Figure 7). 22 Moreover, longerterm correlations between fed funds and other money market rates remain robust, with the fed funds rate remaining a suitable measure of banks’ marginal borrowing costs. A variety of regulatory changes and other developments have also influenced motivations for participating in fed funds and other money markets. Liquidity and capital rules affect the management of bank balance sheets and the costs of many money market transactions, affecting banks’ incentives to engage in short-term borrowing, arbitrage between different money market rates, and provide customers access to their balance sheets. Notably, regulatory changes affect different institutions in different ways. For example, changes to the calculation of FDIC deposit insurance assessment fees affect primarily domestic banks. The implementation of Basel III banking standards also varies by jurisdiction, so the rules for foreign bank branches operating in the United States are somewhat different than those for domestic institutions. 23 The effects of regulatory requirements on money market dynamics can be seen especially around key financial reporting dates. As many market commentators have noted, some borrowers actively manage their balance sheets on quarter-end dates.

Mr. Erçel reviews central bank operations in 1996 and discusses the philosophy of central banks Remarks by the Governor of the Central Bank of the Republic of Turkey, Mr. Gazi Erçel, on the occasion of the 65th Shareholders’ Ordinary General Meeting in Ankara on 15/4/97. I expressed my views concerning the main functions of a central bank in my speech to last year’s General Assembly. Today I would like to summarize the past year’s operations and share with you my thoughts on the philosophy of central banking. You will find detailed assessments of economic developments in Turkey and abroad in the Bank’s Annual Report for 1996, which has already been distributed to you. Instead of repeating these details, I will describe the implications of the events of 1996 for the operations of the Central Bank. The most important circumstance affecting the economy last year was the long-lasting period of political uncertainty. After the general elections, it took the first six months of the year to put together a coalition government. Political instability, Turkey’s entry into the Customs Union, and lack of the political determination needed to fight inflation created uncertainty in the financial markets. The Central Bank responded by aiming its monetary policies at achieving and protecting stability in the financial markets instead of aiming them at decreasing the rate of inflation. While withholding announcement of its targets for the second half of 1996, the Central Bank implemented a monetary program in keeping with its inner discipline.