facility has a cap on individual use of $ 30 billion, and from september 22, 2014, through december 16, 2015, on rrp operations were subject to an overall size limit of $ 300 billion. these issues are discussed in joshua frost, lorie logan, antoine martin, patrick mccabe, fabio natalucci, and julie remache, “ overnight rrp operations as a monetary policy tool : some design considerations, ” federal reserve bank of new york staff reports, no. 712, february 2015. 10 financial firms can also issue very short - term commercial paper or certificates of deposit, but these instruments can also create stability concerns. 11 importantly, in considering the stability of a bank ’ s deposits, the lcr distinguishes between operational and non - operational deposits. banks must hold up to 25 percent of the value of operational deposits in high - quality liquid assets, in order to withstand a 30 - day stress environment. the liquidity requirement for non - operational deposits is less favorable — up to 100 percent — making it more expensive for banks to hold such deposits. 12 12 the federal reserve has also increased its supervisory focus on the liquidity of large banks in particular with the comprehensive liquidity analysis and review. 13 see marco cipriani, gabriele la spada, and philip mulder, “ investors ’ appetite for money - like assets : the money market fund industry after the 2014 regulatory reform, ” federal reserve bank of new york staff reports, no. 816, june 2017. 14 mmfs are open - ended mutual funds that invest in money market instruments. unlike other mutual funds, mmfs have traditionally allowed their investors to redeem shares at a fixed net asset value ( nav ) of $ 1 per share under most circumstances. this characteristic makes mmf shares very similar to bank deposits ( although they are not insured ). mmfs are regulated by the investment company act of 1940, which restricts their holdings to shortterm, high - quality debt. the industry can be divided into two main segments : i ) government mmfs invest in 8 / 10 bis central bankers'speeches treasuries and agency debt and can only lend to the private sector through repos collateralized by treasuries or agency debt ; ii ) prime mmfs can also invest in private unsecured debt. tax - exempt funds represent an additional, smaller segment, which invest mainly in municipal and local authorities ’ debt. tax - exempt funds are regulated in the same way

##er of last resort ” capacity is particularly important when the precautionary demand for liquidity increases substantially, because it is precisely at these times that private provision of liquidity declines. the financial crisis of 2008 provides a striking example of this ability. as shown in figure 1, the federal reserve doubled the size of its balance sheet in a matter of weeks in september 2008 to meet the extraordinary demand for liquidity as private sources of liquidity dried up. 1 / 10 bis central bankers'speeches on the liability side of the federal reserve ’ s balance sheet, the increase in liquidity was matched by increases in bank reserves and treasury deposits through this extraordinary period. 7 the treasury deposits were funded by an increase in bill issuance, hence the amount of officiallyproduced, safe and money - like assets in the financial system increased by around $ 1 trillion in a few weeks. 8 of course, since investors are aware of the central bank ’ s unique ability to quickly supply safe and money - like assets in non - normal times, their incentives to monitor risks in normal times may be reduced. the moral hazard raised by this awareness may be addressed through regulation and supervision. further, the central bank needs to take care that its provision of money - like assets in normal times does not crowd out the private financial system or exacerbate run behavior in stressful times. 9 private provision of money - like assets the private sector plays an important role in the provision of money - like assets. for instance, banks create money - like assets in the form of bank deposits. similarly, nonbank institutions, such as money market funds ( mmfs ), can also provide money - like assets. however, private provision of money - like assets can increase the risk of financial instability. in order to provide money - like assets, financial institutions generally engage in maturity and liquidity transformation, transforming longer term assets into callable liabilities that are runnable. 10 thus, although in normal times investors may perceive these privately produced assets as safe and liquid, a sudden shift in investor perceptions can amplify instability in periods of market stress. to the extent that the private sector does not incorporate the social cost of runs on private callable liabilities, too much private money can be created in normal times, generating a role for public sector intervention. the main way the public sector can mitigate the risks associated with the excessive private supply of money - like assets is through regulation and supervision. by reducing the fragility of