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The changed role of the lender of last resort: Crisis responses of the Federal Reserve, European Central Bank and Bank of England

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  • Oganesyan, Gayane

Abstract

This paper analyzes whether the Lender of Last Resort function has changed in consequence of the recent Global Financial Crisis. The unprecedented emergency actions of the Federal Reserve, European Central Bank and the Bank of England are analyzed in terms of Walter Bagehot's traditional Lender of Last Resort doctrine. The central banks' actions are compared to identify the extensions and paint a general picture of the modern and much more comprehensive Lender of Last Resort function, which includes provision of liquidity and collateral, lowering interest rates and expansionary monetary policy, loosening collateral standards, supporting critical institutions, opening special liquidity facilities that target specific markets or groups of agents, and becoming market maker of last resort and buyer of last resort. The Lender of Last Resort function has been found to have changed.

Suggested Citation

  • Oganesyan, Gayane, 2013. "The changed role of the lender of last resort: Crisis responses of the Federal Reserve, European Central Bank and Bank of England," IPE Working Papers 19/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    • Handle: RePEc:zbw:ipewps:192013
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    Citations

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    Cited by:

    1. Bonta (Mitea) Liana-Antonela, 2018. "A Comparative Analysis of FED and ECB Reactions to the Global Financial Crisis," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 7-11, July.
    2. Eva Zamrazilová, 2014. "Měnová politika: krátkodobá stabilizace versus dlouhodobá rizika [Monetary Policy: Short-Term Stabilization versus Long-Term Risks]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(1), pages 3-31.
    3. Hansjörg Herr, 2014. "The European Central Bank and the US Federal Reserve as Lender of Last Resort," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(1), pages 59-78, Februar.
    4. Nijathaworn, Bandid & Chaikhor, Suwatchai & Chotika-arpa, Suppakorn & Sakkankosone, Suchart, 2015. "Monetary Policy and Foreign Exchange Management: Reforming Central Bank Functions in Myanmar," ADB Economics Working Paper Series 431, Asian Development Bank.
    5. Anne-Marie Rieu-Foucault, 2018. "Les interventions de crise de la FED et de la BCE diffèrent-elles ?," Working Papers hal-04141702, HAL.
    6. Bank for International Settlements, 2014. "Market-making and proprietary trading: industry trends, drivers and policy implications," CGFS Papers, Bank for International Settlements, number 52.
    7. Miroslav Titze, 2017. "Kríza likvidity a finančná nákaza v rokoch 20072009: ponaučenie do budúcnosti [Liquidity Crisis and Financial Contagion in 2007-2009: Another Lesson]," Politická ekonomie, Prague University of Economics and Business, vol. 2017(6), pages 690-708.

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