In the US context: Circa 2020 the minimum reserve balance requirement was removed, so I am not sure why do institutions need to borrow and lend overnight reserves among themselves?
As far as I understand, Interest on Reserve Balances, is the way monetary policy is currently transmitted. So I thought the old federal funds rate didn't exist any more (given that the minimum reserve requirements are gone).
However, Federal Reserve implementation note to the FOMC includes a directive to maintain federal reserve funds within a band, similar to the old regime. What does the federal funds rate even mean when there is no minimum reserve requirement and therefore institutions don't need to borrow reserves overnight?