Broad-Based Emergency Liquidity Programs

In this paper, we analyze broad-based emergency liquidity (BBEL) programs. Our main purpose is to assist policymakers who are considering establishing a BBEL program in designing the most effective program possible as efficiently as possible. Our insights are derived from 33 case studies the Yale Program on Financial Stability produced and existing literature on the topic. Liquidity provision is a long-established mandate of central banks and was a function that private entities performed even before the establishment of central banks. We survey a sampling of cases from the 19th through 21st centuries, drawn from 10 countries and regions, to distill what elements make for effective BBEL programs and which factors can jeopardize a program's effectiveness.: In our review of these cases, we identified five major themes: (1) early deployment of credible BBEL assistance in the acute phase of a crisis can serve to arrest or moderate the crisis and stop it from evolving into an extended chronic phase; (2) relying on existing authorities, programs, or administrative frameworks enables the efficient design and deployment of BBEL programs; (3) if the liquidity constraint persists, we often see the use of multiple BBEL programs to provide wide access to a broad range of participants; (4) other interventions also commonly employed alongside BBEL programs include credit and account guarantees in the acute phase and asset purchases, recapitalizations, and loan guarantees in the chronic phase; and (5) in all phases, clear communication is a valuable policy tool to drive utilization, and positive announcement effects are possible.