Tag Archives: Lender of last resort

The SNB has published its annual report. Some highlights from the summary: Climate risks and adjustments to climate policy can trigger or amplify market fluctuations and influence the attractiveness of investments. From an investment perspective, such risks are essentially no different from other financial risks. The SNB manages the risks to its investments by means of its diversification strategy. … A prerequisite for illiquid assets to be used as collateral in obtaining liquidity...

Niall Ferguson, Martin Kornejew, Paul Schmelzing and Moritz Schularick in CEPR dp 17858: From the introduction: … time and again, central banks deployed their power to create liquidity in a bid to insulate economies from disasters. … first began to be linked to geopolitical tail events during the 17th and 18th centuries – occurring with increasing regularity during wars and revolutions –, … the context of central bank liquidity support gradually but consistently shifted...

The “Banking Stability” Expert Group that was formed following the failure of Credit Suisse has published its report (in German). I quote and add my own comments in brackets […]. Summary: Die staatlich unterstützte Übernahme der Credit Suisse durch die UBS im März 2023 hat eine gefährliche Situation schnell stabilisiert. Die Schweiz hat damit einen wichtigen Beitrag zur internationalen Finanzstabilität geleistet. Die Credit Suisse war am 19. März 2023 die erste global systemrelevante Bank...

Chapter 5 in the CEPR eBook, November 24, 2021. HTML. From the conclusion: From a macroeconomic perspective, central banks can largely neutralise the consequences of CBDC. What is highly uncertain, however, is whether they would choose to do so – the political risks of ‘Reserves for All’ are first-order. The decision for or against CBDC thus should not only reflect the assessment of economic trade-offs, but also whether societies are confident in their ability to efficiently manage...

In the FT, Martin Wolf discusses Mervyn King’s proposal to make the central bank a “pawnbroker for all seasons” as laid out in King’s recent book “The End of Alchemy.” Lord King offers a novel alternative. Central banks would still act as lenders of last resort. But they would no longer be forced to lend against virtually any asset, since that very possibility must create moral hazard. Instead, they would agree the terms on which they would lend against assets in a crisis, including...