Reserves are but one tool in the arsenal and it's also for tightly managing the maximum leverage. If all your assets are not cash-equivalent and they fluctuate in value then there is no maximum leverage that can be guaranteed a priori and there is operational risk.
Not how it works. How it works is that there are a number of constraints and metrics placed on banks that they need to satisfy and prevent them taking risk. At any time it could be any one of these that is the limiting factor on risk. It may not be a measure of "reserves" that is the constraint.
It was certainly a move to stabilize the stock market and Treasury market. However, having a reserve asset that steadily, stably climbs lower is not a store of value by any definition.
That doesn't sound like a full reserve though as its not 100% cash. It says right there that its partially invested in risky assets. Whether they're low risk is just an opinion.
But even assuming it was a full reserve, I don't think its fundamentally different enough to be allowed to skirt the existing laws.
As any effort banks make to shift their zero risk assets to cash won't go unnoticed by the ECB, there's also the implied risk that any bank going to the effort of acquiring unusually large piles of cash to avoid negative interest on reserves, will be subject to other direct or indirect financial penalties.
I'd still expect banks' cash holdings to rise substantially at the margin, where that risk is pretty low, but its existence means it probably wouldn't economically rational for any bank to try to evade the interest on reserves even if their cost of holding cash was zero.
I have a hard time following what you've written, but none of it seems to have to do with liquidity - short term investments - so why bring up reserves?
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