Other institutions are beginning to recognize that non-traditional lending programs, when done right, may have hidden costs in the form of higher overhead and increased management attention. Clearly, then, these are not trouble-free times. Banking is a business of identifying, measuring and managing risk, and significant risks remain, even as we enjoy remarkably favorable circumstances. New opportunities Of course, these also are times of enormous opportunity for banks. The rapid pace of technological advancement and recent legislative changes are opening new frontiers for banks and other financial institutions. For example, the convenience of the Internet is changing how consumers shop for financial products and services and with which providers they establish relationships. In response, some institutions are seeking alliances or mergers to broaden the range of products and services they offer, such as the proposed acquisition of US Trust, a bank offering advisory services to high net worth individuals, by Charles Schwab & Co., one of the largest discount brokerage firms. Once viewed mainly as a cost center, technology now is increasingly seen by banks as a means to enhance the value of customer relationships through cross-selling and improved customization. As a result, developing an Internet platform and other technological capacities is a major priority for many financial service providers. Indeed, a recent survey reported that US bank managers for the first time cited investments in Internet technology as their top budget priority, ahead of other traditionally key budget items such as investments in call centers and brick-and-mortar branch networks.

14  Selling dollar rolls when concerns arise about the availability of certain TBA contracts is conceptually similar to making SOMA Treasury holdings available to the market through our securities lending program. One key difference is that the Desk offers settled Treasury holdings to the market through its securities lending program, whereas the Desk only rolls unsettled MBS holdings. BIS central bankers’ speeches  5  directive, with the goal of supporting a stronger economic recovery in the context of price stability. References Fleming, Michael (2000). “The Benchmark U.S. Treasury Market: Recent Performance and Possible Alternatives.” Federal Reserve Bank of New York Economic Policy Review, Vol. 6, no. 1 (April): 129–45. Fleming, Michael (2002). “Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings.” Journal of Money, Credit, and Banking, Vol. 34, no. 3 (August): 707–35. Gagnon, Joseph, Matthew Raskin, Julie Remache, and Brian Sack (2010). “Large-Scale Asset Purchases by the Federal Reserve: Did They Work?” Federal Reserve Bank of New York Staff Reports, no. 441, March. Hancock, Diana, and Wayne Passmore (2011). “Did the Federal Reserve's MBS Purchase Program Lower Mortgage Rates?” Journal of Monetary Economics, Vol. 58 (July): 498–514. Krishnamurthy, Arvind, and Annette Vissing-Jorgensen (2011). “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy.” Brookings Papers on Economic Activity, no. 2: 215–65. Li, Canlin, and Min Wei (2012). “Term Structure Modelling with Supply Factors and the Federal Reserve’s Large Scale Asset Purchase Programs.” Finance and Economics Discussion Series 2012–37. Washington: Board of Governors of the Federal Reserve System, May.