Central banks as lender of last resort: experiences during the 2007-2010 crisis and lessons for the future

Dietrich Domanski, Richhild Moessner and William R. Nelson

No 2014-110, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: During the 2007-2010 financial crisis, central banks accumulated a vast amount of experience in acting as lender of last resort. This paper reviews the various ways that central banks provided emergency liquidity assistance (ELA) during the crisis, and discusses issues for the design of ELA arising from that experience. In a number of ways, the emergency liquidity assistance since 2007 has largely adhered to Bagehot's dictums of lending freely against good collateral to solvent institutions at a penalty rate. But there were many exceptions to these rules. Those exceptions illuminate the situations where the lender of last resort role of central banks is most difficult. They also highlight key challenges in designing lender of last resort policies going forward.

Keywords: Banking crisis; central bank liquidity; lenders of last resort (search for similar items in EconPapers)
JEL-codes: E58 F31 N10 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-05-14
New Economics Papers: this item is included in nep-ban, nep-cba, nep-hpe, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.federalreserve.gov/econresdata/feds/2014/files/2014110pap.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2014-110

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().