Research from the Federal Reserve Bank of New York suggests that the implementation details of financial regulations can have important implications for global financial markets. Differences in implementation of the leverage ratio in the US compared to Europe appear to have a significant impact on the US repo market.
Another important lesson is that financial regulations can impact monetary policy implementation. Here, the ON RRP facility appears to have played a useful role as a shock absorber in the tri-party repo market by limiting the effect of variations in European banks’ demand for funds on broader money market conditions.