in this regard, i am worried about two current shortcomings : the reach of title ii ’ s one - day stay on the close out of qualified financial contracts is incomplete and does not extend to contracts governed by non - u. s. law with nonu. s. counterparties. the placement of the parent company into receivership may be treated by these counterparties as an event of default due to the presence of a parent guarantee or other cross - default provisions triggered by the parent - level insolvency. unless market participants make the appropriate contractual changes that will ensure that the placement of the parent company into title ii will not trigger the close - out provisions of over - the - counter derivatives and other qualified financial contracts that are outside the reach of title ii ’ s u. s. application, foreign counterparties to a sifi will tend to exercise this right bis central bankers ’ speeches whenever it is in their individual economic interest to do so. this would create significant difficulties. such actions could greatly complicate the operations of the firm during a time when it is already under considerable stress and could propagate stress more broadly in financial markets. there are two main courses of action for addressing this concern, and they are not mutually exclusive. first, existing derivative contracts need to be amended and future contracts need to provide that the parent ’ s entry into the title ii proceeding does not trigger the close out option. second, legal changes need to be implemented abroad so that the one - day stay that applies to qualified financial contracts governed by u. s. law is enforceable against those contracts governed by foreign law. only by making these changes can we avoid the potential for disruptive close outs. i strongly encourage the ongoing efforts to address this critical issue. a second issue with respect to title ii resolution on a cross - border basis is that we cannot be certain how foreign authorities will react when the parent holding company is put into the title ii proceeding. while the u. s. authorities have been in discussion with our colleagues abroad to enable the coordination needed for a smooth cross - border resolution process, uncertainties remain regarding the circumstances under which host authorities may either choose to take or be required to take actions such as unilateral “ ring - fencing ” that might disrupt the implementation of the single point of entry approach. thus, we need to continue to work with foreign regulators to iron out any issues ahead of time to remove these uncertainties so that the resolution regime will work well for global

s centrally cleared institutional triparty service ( ccit ), which opened the centrally - cleared triparty repo market to institutional cash lenders, and the growth of activity in the centrally - cleared bilateral repo market by institutions being sponsored by members of the fixed income clearing corporation ’ s ( ficc ) government securities division. separately, some foreign banking organizations that had been active borrowers in the offshore eurodollar market have shifted their borrowing in favor of domestic deposits that are economically similar to eurodollars. kroeger, mcgowan, and sarkar ( 2018 ) provides detailed background on behavior of the pre - crisis framework. the regulation d reserve requirement is still binding for many smaller banks. it is important to note that these new regulatory and behavioral factors are related to liquidity in general and not strictly about reserves held in federal reserve accounts as in regulation d. banks have many possible means for addressing their requirements under the lcr, and the lcr rule does not impose any specific requirement to hold central bank reserves. have various ways to meet their obligations under this system : their choices are not limited to simply holding more reserves. as a result, reserve scarcity may be accompanied by shifts in market pricing and flows that we might not have seen in the old framework. finally, the old system provided a degree of stability over time through its ability to reallocate scarce reserves among banks in response to shocks through interbank lending in the federal funds market. this interbank activity largely dried up following the crisis and has not meaningfully returned — in part due to regulatory incentives, but also because banks report that they are now less interested in taking on financial exposure to other banks. 24 as a result, it is possible that a regime of less abundant reserves may now be accompanied by an element of increasing volatility or periodic turbulence in money markets. one new way in which scarcity might manifest itself going forward is through effects related to the lcr. very generally, the lcr is designed to ensure that banks hold a sufficient reserve of high - quality liquid assets ( hqla ) to allow them to survive a short - term period of significant liquidity stress. now, balance sheet normalization involves reducing the private sector ’ s holdings of one type of lcr hqla, reserves, and increasing others — treasuries and agency mbs — by an equal aggregate amount, so normalization does not make hqla writ large more scarce. 25 however, within the universe of hq