In response the Fed now pays interest on excess reserves banks hold at the Fed and uses reverse re-purchase agreements to adjust the fed funds rate target. (indexologyblog.com)
The presentation suggested that such a facility would allow the Committee to offer an overnight, risk - free instrument directly to a relatively wide range of market participants, perhaps complementing the payment of interest on excess reserves held by banks and thereby improving the Committee's ability to keep short - term market rates at levels that it deems appropriate to achieve its macroeconomic objectives. (soberlook.com)
Once large banks stop earning lot of income from interest on excess reserves from the Fed, they might have incentive to raise funds from the public to earn from the net interest margin, just like banks historically did before the Fed decided to subsidize them with free money without the need for them to lend for business purposes. (wolfstreet.com)