system ( 2016 ), “ minutes of the federal open market committee, july 26 – 27, 2016, ” press release, august 17 ; and board of governors of the federal reserve system ( 2016 ), “ minutes of the 9 / 10 bis central bankers'speeches federal open market committee, november 1 - 2, 2016, ” press release, november 23, 8 see board of governors of the federal reserve system ( 2017 ), “ fomc issues addendum to the policy normalization principles and plans, ” press release, june 14, paragraph 6. 9 the fomc announced this change to its balance sheet policy in its september 2017 postmeeting statement ; see board of governors of the federal reserve system ( 2017 ), “ federal reserve issues fomc statement, ” press release, september 20. 10 see board of governors, “ fomc issues addendum, ” paragraph 6, in note 7. 11 see ihrig and others, “ managing the composition of high - quality liquid assets, ” in note 5. 12 the december 2017 survey of primary dealers is available on the federal reserve bank of new york ’ s website a t www. newyorkfed. org / medialibrary / media / markets / survey / 2017 / dec - 2017 - spd - results. pdf. the december survey of market participants is available at www. newyorkfed. org / medialibrary / media / markets / survey / 2017 / dec - 2017 - smp - results. pdf. return to text 13 see federal reserve bank of new york ( 2018 ), open market operations during 2017 ( new york : frbny, april ), available at www. newyorkfed. org / markets / annual _ reports. html. among other things, the report reviews the conduct of open market operations and other developments that influenced the system open market account of the federal reserve in 2017. 14 for a discussion of the overall effects of the decline in the fed ’ s balance sheet, see jane ihrig, lawrence mize, and gretchen c. weinbach ( 2017 ), “ how does the fed adjust its securities holdings and who is affected? ( pdf ) ” finance and economics discussion series 2017 – 099 ( washington : board of governors of the federal reserve system, september ). 10 / 10 bis central bankers'speeches

##ity regulations let me now back up to the time just before the financial crisis and briefly describe why liquidity regulations are necessary for banks. banking organizations play a vital role in the economy in serving the financial needs of u. s. households and businesses. they perform this function in part through the mechanism of maturity transformation — that is, taking in short - term deposits, thereby making a form of short - term, liquid investments available to households and businesses, while providing longer - term credit to these same entities. this role, however, makes banking firms vulnerable to the potential for rapid, broad - based outflows of their funding ( a so - called run ), and these institutions must therefore balance the extent of their profitable maturity transformation against the associated liquidity risks. 3 leading up to the 2007 – 09 financial crisis, some large firms were overly reliant on certain types of short - term funding and overly confident in their ability to replenish their funding when it came due. thus, during the crisis, some large banks did not have sufficient liquidity, and liquidity risk management at a broader set of institutions proved inadequate at anticipating and compensating for potential outflows, especially when those outflows occurred on a rapid basis. 4 in the wake of the crisis, a combination of regulatory reforms and stronger supervision was needed to promote increased resilience in the financial sector. with regard to liquidity, the prudential regulations and supervisory programs implemented by the u. s. banking agencies have resulted in significant improvements in the liquidity positions and in the risk management of our largest institutions. and, working closely with other jurisdictions, we have also implemented global liquidity standards for the first time. these standards seek to limit the effect of short - term outflows and extended overall funding mismatches, thus improving banks ’ liquidity resilience. one particular liquidity requirement for large banking organizations is the lcr, which the u. s. federal banking agencies adopted in 2014. 5 the lcr rule requires covered firms to hold sufficient high - quality liquid assets ( hqla ) — in terms of both quantity and quality — to cover potential outflows over a 30 - day period of liquidity stress. the lcr rule allows firms to meet this requirement with a range of cash and securities and does not apply a haircut to reserve balances or treasury securities based on the estimated liquidity value of those instruments in times of stress. further, firms are required