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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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    Citations

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    Cited by:

    1. Adrian, Tobias & Boyarchenko, Nina, 2018. "Liquidity policies and systemic risk," Journal of Financial Intermediation, Elsevier, vol. 35(PB), pages 45-60.
    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. Gazi I. Kara & S. Mehmet Ozsoy, 2016. "Bank regulation under fire sale externalities," Finance and Economics Discussion Series 2016-026, Board of Governors of the Federal Reserve System (U.S.).
    4. 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.
    5. Roberts, Daniel & Sarkar, Asani & Shachar, Or, 2023. "Liquidity regulations, bank lending and fire-sale risk," Journal of Banking & Finance, Elsevier, vol. 156(C).
    6. Gazi I Kara & S Mehmet Ozsoy & Itay Goldstein, 2020. "Bank Regulation under Fire Sale Externalities," The Review of Financial Studies, Society for Financial Studies, vol. 33(6), pages 2554-2584.
    7. Christopher Hoag, 2019. "Liquidity and Borrowing from a Lender of Last Resort during the Crisis of 1884," Working Papers 1901, Trinity College, Department of Economics, revised Jul 2019.
    8. Okahara, Naoto, 2020. "Liquidity requirement and banks' lending," MPRA Paper 101816, University Library of Munich, Germany.
    9. Julia Körding & Beatrice Scheubel, 2018. "Liquidity regulation, the central bank and the money market," DNB Working Papers 596, Netherlands Central Bank, Research Department.
    10. Sonia Ondo Ndong & Laurence Scialom, 2009. "Northern Rock: The Anatomy of a Crisis—The Prudential Lessons," Palgrave Macmillan Books, in: Robert R. Bliss & George G. Kaufman (ed.), Financial Institutions and Markets, chapter 3, pages 51-74, Palgrave Macmillan.
    11. Diana Bonfim & Moshe Kim, 2012. "Liquidity risk in banking: is there herding?," Working Papers w201218, Banco de Portugal, Economics and Research Department.
    12. Retselisitsoe I. Thamae & Nicholas M. Odhiambo, 2022. "The impact of bank regulation on bank lending: a review of international literature," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(4), pages 405-418, December.
    13. Bank for International Settlements, 2016. "Macroprudential policy," BIS Papers, Bank for International Settlements, number 86.
    14. Shakina, Ekaterina & Angerer, Martin, 2018. "Coordination and communication during bank runs," Journal of Behavioral and Experimental Finance, Elsevier, vol. 20(C), pages 115-130.
    15. Diana Bonfim & Moshe Kim, 2012. "Liquidity risk in banking: is there herding?," Working Papers w201218, Banco de Portugal, Economics and Research Department.
    16. Augusto Hasman, 2013. "A Critical Review Of Contagion Risk In Banking," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 978-995, December.
    17. Nikolaou, Kleopatra, 2009. "Liquidity (risk) concepts: definitions and interactions," Working Paper Series 1008, European Central Bank.

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