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16 Results

Emergency Liquidity Facilities, Signalling and Funding Costs

In the months preceding the failure of Lehman Brothers in September 2008, banks were willing to pay a premium over the Federal Reserve’s discount window (DW) rate to participate in the much less flexible Term Auction Facility (TAF). We empirically test the predictions of a new signalling model that offers a rationale for offering two different liquidity facilities.
May 5, 2015

Liquid Markets for a Solid Economy

Remarks Carolyn A. Wilkins Chambre de commerce du Montréal métropolitain Montréal, Quebec
Senior Deputy Governor Wilkins discusses funding and market liquidity, and announces consultations on the Bank’s market operations and emergency lending frameworks.
May 19, 2011

Lessons from the Use of Extraordinary Central Bank Liquidity Facilities

The recent crisis was characterized by widespread deterioration in funding conditions, as well as impairment of the mechanism through which liquidity is normally redistributed within the financial system. Central banks responded with extraordinary measures. This article examines the provision of liquidity by central banks during the crisis as they adapted their existing facilities and introduced new ones, while encouraging a return to private markets and mitigating moral hazard. A review of this experience illustrates the importance of clear principles for intervention, a flexible operating framework, and clear communication and co-operation by central banks. By exposing the degree of interdependence of financial institutions and markets, the crisis highlighted the need for reforms aimed at improving the infrastructure supporting core funding markets and the liquidity of individual institutions.
December 25, 2004

The Bank of Canada as Lender of Last Resort

As the ultimate provider of Canadian-dollar liquidity to the financial system, the Bank of Canada has the unique capacity to create Canadian-dollar claims on the central bank and the power to make secured loans or advances to chartered banks and other members of the Canadian Payments Association. The Bank supplies overnight credit on a routine basis through the Standing Liquidity Facility (SLF) to direct participants in the Large Value Transfer System, and Emergency Lending Assistance (ELA) to solvent deposit-taking institutions that require more substantial and prolonged credit. The authors review the policy framework that guides the Bank's lender-of-last-resort function, including the key issues, terms and conditions, and eligibility criteria associated with its SLF and ELA activities. Also discussed are foreign currency ELA, the relationship between SLF and ELA, systemic risk and Bank of Canada intervention, and the potential provision of liquidity to major clearing and settlement systems.
December 23, 2004

Bank of Canada Lender-of-Last-Resort Policies

The Bank of Canada has distinct roles as a lender of last resort. This article outlines how and under what circumstances the Bank can routinely provide liquidity to facilitate payment settlement, as well as the various ways it can respond in more exceptional situations.

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