government can deposit surplus funds in their bank account with us, their crown settlement account ( csa ). it creates a liability on our balance sheet as it is money the government can draw on. when the government receives taxes, or sells a bond or bill, it produces an inflow into its bank account. conversely, payments of welfare benefits, interest on government bonds or repaying the principal of a bond as it matures, produces outflows from the csa. before covid - 19, the csa typically had a positive balance up to $ 6 billion to manage the crown ’ s cash flows. there was an overdraft facility available up to $ 5 billion, which has primarily been used by the crown under normal circumstances to help manage very short - term mismatches created by large crown cash flows, such as around a bond maturity. liquidity management and other assets before covid - 19, the asset side of our balance sheet consisted of two main categories to achieve our policy objectives. i ) liquidity management and monetary policy implementation the first was liquidity management, where we were a net lender to actively influence conditions in money markets, to ensure that overnight interest rates in the market traded near the ocr set by the mpc. 5 in short, from 1999 the reserve bank operated a type of “ corridor system ” to implement monetary policy. 6 banks received the ocr on their settlement balances with us, up to a certain amount. if they held balances above this level, they received ocr less a penalty rate. similarly, if banks found themselves with insufficient balances at the end of the day, they could borrow from us but at ocr plus a penalty rate. by ensuring it was costly for a bank to have insufficient cash and also offering a poor return if settlement balances were too high, it incentivised banks to manage their balances carefully. it also encouraged borrowing or lending in the inter - bank market. the main role for the reserve bank in this framework was to be a net lender into short - term money markets to ensure there was enough settlement balances in aggregate in the system so that banks could collectively operate within this corridor, where there wasn ’ t too little or too much liquidity. an important feature of the amount of aggregate settlement balances – electronic central bank money – is that, alongside physical currency, it is a closed system. that is, one bank can reduce its settlement balance by paying another bank, but this only

for regulatory arbitrage and preserve appropriate level playing field. the financial stability board following the g20 recommendation has launched an ambitious regulatory program which aims at better controlling risks which are related the shadow banking sector. indeed, the us have recently adopted a regulatory framework for money market funds ( july 2014 ). other reviews are still ongoing, i am thinking of the assessment of risks and systemicity of asset managers whose assets under management have experienced a major growth these last few years, or the rapid development of etfs providing real time liquidity on their liability while their matching assets have a lower liquidity. in europe, this global initiative translated into a number of regulatory initiatives such as the securities financing transactions regulation ( repos and sftrs ) or the regulation of money market funds. the final objective was to turn the shadow banking sector into a safer and regulated “ market - based financing ”. 2. coming now to my second point : even though regulatory arbitrage is a risk, consistency between sectors should not be mistaken with uniformity and a “ one size fits all ” approach could lead to unintended adverse consequences. from a financial stability perspective, one can easily draw the conclusion that risks of bank ’ s runs and shadow banking entity ’ s runs are very similar and therefore should have a similar regulatory treatment. yet, the timing and consequences of higher lapses in insurance are hardly comparable to the banks ’ one. moreover, the shadow banking sector is much more complex, not harmonized and hard to fully capture, even after the massive reduction of activities related to this sector which followed the financial crisis. indeed, entities such as insurance companies, ccps, asset managers and any other non - bank actors have their own business models and specificities. therefore mirroring by duplicating the gsibs approach to these non - bank actors may either lead to inadequate policy options ( tlac for ccps, ill calibrated higher loss absorbency ( hla ) for gsiis ) or to fostering pro - cyclicality. in this latter case, all market players would take the same positions, on the same financial instruments at the same time fostering a “ one way ” market. this herd behavior can lead to detrimental consequences in terms of financial stability by amplifying an irrational market decision based upon no fundamentals, which could rapidly spread to the whole financial sphere. bis central bankers ’ speeches in addition, none of these sectors is unregulated today in europe ( ai