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Liquidity regulation and the lender of last resort

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  • Rochet, J C.

Abstract

The recent subprime crisis has brought back to light proposals to regulate banks’ liquidity as a complement to solvency regulations. Based on recent academic research, I suggest that liquidity regulations might indeed be a way to limit the pressure on Central Banks in favour of liquidity injections during crisis periods. Another crucial question is the allocation of responsibilities between the Central Bank, the Banking Supervisors and the Treasury in the management of banking crises.

Suggested Citation

  • Rochet, J C., 2008. "Liquidity regulation and the lender of last resort," Financial Stability Review, Banque de France, issue 11, pages 45-52, February.
  • Handle: RePEc:bfr:fisrev:2008:11:7
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    References listed on IDEAS

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    1. Gabriel Jiménez & Jesús Saurina, 2006. "Credit Cycles, Credit Risk, and Prudential Regulation," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
    2. Gordy, Michael B. & Howells, Bradley, 2006. "Procyclicality in Basel II: Can we treat the disease without killing the patient?," Journal of Financial Intermediation, Elsevier, pages 395-417.
    3. Martin Hellwig, 1995. "Systemic Aspects of Risk Management in Banking and Finance," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), pages 723-737.
    4. Borio, Claudio & Tsatsaronis, Kostas, 2004. "Accounting and prudential regulation: from uncomfortable bedfellows to perfect partners?," Journal of Financial Stability, Elsevier, pages 111-135.
    5. Nikola Tarashev & Claudio Borio & Kostas Tsatsaronis, 2009. "The systemic importance of financial institutions," BIS Quarterly Review, Bank for International Settlements.
    6. Claudio Borio, 2010. "Ten propositions about liquidity crises," CESifo Economic Studies, CESifo, pages 70-95.
    7. Charles Goodhart, 2004. "Per Jacobsson Lecture: Some New Directions for Financial Stability?," FMG Special Papers sp158, Financial Markets Group.
    8. Claudio Borio & Piti Disyatat, 2010. "Unconventional Monetary Policies: An Appraisal," Manchester School, University of Manchester, pages 53-89.
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    Cited by:

    1. Adrian, Tobias & Boyarchenko, Nina, 2014. "Liquidity policies and systemic risk," Staff Reports 661, Federal Reserve Bank of New York.
    2. Mark Carlson, 2015. "Lessons from the Historical Use of Reserve Requirements in the United States to Promote Bank Liquidity," International Journal of Central Banking, International Journal of Central Banking, vol. 11(1), pages 191-224, January.
    3. Jean-Pierre Landau, 2016. "A liquidity-based approach to macroprudential policy," BIS Papers chapters,in: Bank for International Settlements (ed.), Macroprudential policy, volume 86, pages 147-156 Bank for International Settlements.
    4. Sonia Ondo-Ndong & Laurence Scialom, 2008. "Northern Rock: The anatomy of a crisis – the prudential lessons," EconomiX Working Papers 2008-23, University of Paris Nanterre, EconomiX.
    5. Bank for International Settlements, 2016. "Macroprudential policy," BIS Papers, Bank for International Settlements, number 86, June - Se.
    6. Augusto Hasman, 2013. "A Critical Review Of Contagion Risk In Banking," Journal of Economic Surveys, Wiley Blackwell, pages 978-995.
    7. Bartosz Mackowiak & Mirko Wiederholt, 2009. "Optimal Sticky Prices under Rational Inattention," American Economic Review, American Economic Association, pages 769-803.

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