incentives, the efficiency of reserves redistribution through the system improves, and market functioning is enhanced. in aggregate, this activity can prevent rates from rising further, all else being equal. the point at which banks, in aggregate, have a relatively immutable demand for reserves, and are unwilling to lend them out, is evident when a small decrease in the supply of reserves results in a sharp increase in the cost to borrow them. our monetary policy tools are well positioned to help us avoid this outcome. but, of course, greater willingness of banks to reallocate across close substitutes should help avoid the emergence of sudden pressures in money markets by reducing money market frictions. in 2021, the federal reserve launched the srf, which, along with the discount window, should help cap upward pressure in repo markets that could spill over into the federal funds market. use of these facilities also increases the supply of reserves in the system. the enhanced clarity for firms that fed facilities are a fully acceptable venue to get same - day liquidity for their hqla should help reassure firms about holding reserves and their close substitutes, such as treasury securities, in their liquidity portfolios. of course, as i stated earlier, for the largest banks, there is a requirement that they hold highly liquid assets to address their own liquidity risks. they must also be ready to use private markets to monetize these assets. it is also critical that banks recognize and manage the interest rate and liquidity risk of their securities portfolios to ensure those securities held for liquidity purposes can be monetized in stress without creating other adverse effects on a firm's safety and soundness. in 2022 and 2023, certain large banks did not effectively manage the risks of rising rates, and suffered significant fair value losses on their securities holdings, including those in held - to - maturity ( htm ) portfolios. these losses affected their ability to respond to liquidity stress, as monetizing the assets could result in realizing losses. when the banking stress hit in march 2023, these securities could not be sold to meet stressed outflows because large unrealized losses inhibited their sale without significant capital implications. this is further complicated in the case of htm securities, which cannot be sold without risking revaluing a firm's entire htm portfolio. selling htm securities to generate liquidity would therefore have had a particularly large effect on these firms'capital levels, likely increasing the stress on these firms.

significant losses. to address these gaps, we are considering a partial limit on the extent of reliance on htm assets in larger banks'liquidity buffers, such as those held under the lcr and ilst requirements. these adjustments would address the known challenges of banks being able to use these assets in stress conditions. finally, we are reviewing the treatment of a handful of types of deposits in the current liquidity framework. observed behavior of different deposit types during times of stress suggests the need to recalibrate deposit outflow assumptions in our rules for certain types of depositors. we are also revisiting the scope of application of our current liquidity framework for large banks. 4 / 5 bis - central bankers'speeches these enhancements to our liquidity regulations will help bolster firms'ability to manage liquidity shocks, and they will also be well integrated with our monetary policy tools and framework. modernizing our tools to meet current and future needs turning back to the discount window, i also want to note that the discount window has served its role well in recent years, and that we are also engaging in ongoing work to improve its operations. given the crucial role of the discount window in providing ready access to liquidity in a wide variety of market conditions, we continuously work to assess and improve its functionality while engaging with current and potential users of the window. among the steps we have taken recently include that we now have an online portal, discount window direct, that allows firms to request and prepay discount window loans in a more streamlined manner than was previously possible. we also recently published a request for information on discount window operations and daylight credit asking about key components of these functions. feedback from the public will help us prioritize areas for improvement, so i strongly encourage anyone with an interest in this topic to weigh in during the comment period. your feedback will help us ensure that the discount window continues to improve in its role of providing ready access to funding under a variety of market conditions. thank you. 1 the views i express here are my own and not necessarily those of my colleagues on the board of governors of the federal reserve system or the federal open market committee. 2 see michael s. barr ( 2023 ), " the 2023 u. s. treasury market conference, " speech delivered at the federal reserve bank of new york, new york, november 16. 3 see " subparts d and o - enhanced prudential standards " in board of governors of the federal reserve system