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Full-Text Articles in Social and Behavioral Sciences
The Structure Of Production And Endogenous And Exogenous Liquidity Of Financial Intermediaries, Daniel Fernández
The Structure Of Production And Endogenous And Exogenous Liquidity Of Financial Intermediaries, Daniel Fernández
Journal of New Finance
Banks directly manage their own liquidity. Banks also indirectly manage the liquidity of the entire economic system. In this article we discuss the relationship between endogenous and exogenous bank liquidity, and their corresponding relationship to the structure of production. We explore these liquidity relationships in the context of both a decentralized and centralized system of free banking, comparing both with the monopoly regime of central banks, “convertible and inconvertible liabilities. We analyze the incentives that engender a liquid “system in the context of free banking as well as the perversion of those same incentives in the context of central banking, …
The Portuguese Guarantee Scheme (Portugal Gfc), Julia A. Arnous
The Portuguese Guarantee Scheme (Portugal Gfc), Julia A. Arnous
Journal of Financial Crises
By October 2008, Portuguese banks’ access to liquidity was severely restricted due to strains in international wholesale markets. On October 12-13, 2008, the Portuguese government notified the European Commission of a guarantee scheme intended to promote solvent credit institutions’ access to liquidity as part of the European policy response to the acute financial crisis aiming to achieve and maintain financial stability. Under the scheme, the Portuguese government guaranteed financing agreements and banks’ issuance of non-subordinated short- and medium-term debt. To obtain a guarantee under the Scheme, banks paid a fee based on the maturity of the debt and a risk …
The Polish Guarantee Scheme (Poland Gfc), Manuel Leon Hoyos
The Polish Guarantee Scheme (Poland Gfc), Manuel Leon Hoyos
Journal of Financial Crises
Faced with the global financial crisis of 2007–2009, Poland implemented a scheme of State support for financial institutions. In view of a potential global credit crunch, it aimed at improving short- and medium-term liquidity of domestic financial institutions. The scheme came into force on March 13, 2009, and was approved by the European Commission under European Union State Aid rules on September 25, 2009. The scheme enabled the Ministry of Finance, on behalf of the State Treasury, to provide support in the form of Treasury guarantees on newly issued bank debt and the exchange of Treasury bonds for less liquid …
Ireland's Credit Institutions (Eligible Liabilities Guarantee) Scheme (Ireland Gfc), Claire Simon
Ireland's Credit Institutions (Eligible Liabilities Guarantee) Scheme (Ireland Gfc), Claire Simon
Journal of Financial Crises
Following the failure of Lehman Brothers in September 2008, Irish banks found themselves unable to roll over their significant foreign borrowings on the interbank lending market. With the banks facing a liquidity crisis, the Irish government decided to issue a blanket guarantee of all liabilities of six banks through the Credit Institutions Financial Support Scheme (CIFS). As the crisis worsened, and it became clear that Irish banks were facing a solvency—not just liquidity—crisis, the Irish government was forced to provide additional support to the financial system, which took the form of capital injections and a national asset management company for …
The United Kingdom's Corporate Bond Secondary Market Scheme (U.K. Gfc), Claire Simon
The United Kingdom's Corporate Bond Secondary Market Scheme (U.K. Gfc), Claire Simon
Journal of Financial Crises
In late 2008, at the height of the Global Financial Crisis, increased liquidity premia and risk aversion in the secondary market hindered companies’ ability to issue corporate bonds. In response, in January 2009, Her Majesty’s Treasury authorized the Bank of England to establish a facility to purchase commercial bonds through the Asset Purchase Facility. In March 2009, the Bank of England published details on the Corporate Bond Secondary Market Scheme, in conjunction with its quantitative easing program. Under the scheme, the Bank acted as a market maker of last resort in the secondary bond market, making regular purchases of a …
The United Kingdom's Commercial Paper Facility (U.K. Gfc), Claire Simon
The United Kingdom's Commercial Paper Facility (U.K. Gfc), Claire Simon
Journal of Financial Crises
In January 2009, following continued increases in commercial paper spreads, Her Majesty’s Treasury authorized the Bank of England to begin purchasing commercial paper under the Asset Purchase Facility (APF) in order to maintain UK-based corporations’ access to short-term financing. Under the Commercial Paper Facility (CPF), the Bank purchased commercial paper from both primary issuers and secondary holders at a rate that was favorable to issuers during the credit crunch but that would no longer be attractive once the markets recovered. By serving as a backstop, or market maker of last resort (MMLR), the Bank helped to restore liquidity to corporate …
The Primary Dealer Credit Facility (Pdcf) (U.S. Gfc), Karen Yang
The Primary Dealer Credit Facility (Pdcf) (U.S. Gfc), Karen Yang
Journal of Financial Crises
On March 16, 2008, the Federal Reserve created the Primary Dealer Credit Facility, or PDCF, to provide overnight funding to primary dealers in the tri-party repurchase agreement (repo) market, where lenders had become increasingly risk averse. Loans were fully secured by (initially) investment-grade securities and offered at the primary credit rate by the Federal Reserve Bank of New York. The eligible collateral was significantly expanded in September 2008, after rumors of Lehman Brothers potentially filing for bankruptcy, to include all of the types of instruments that could be pledged at the two major tri-party repo clearing banks. The PDCF was …
The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
Beginning in summer 2007, the Federal Reserve (the Fed) was called upon to address a severe disruption in the interbank lending markets sparked by a downturn in the subprime mortgage market. As these developments began to impact the ability of banks to raise adequate funding, the Fed encouraged them to utilize the Discount Window (DW), its standing facility for lending to depository institutions, and repeatedly decreased the lending rate to make the facility more accessible. Despite the Fed’s efforts, for a number of reasons, including historical perceptions of stigma, banks were reluctant to utilize the DW. In December 2007, the …