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Investigating the role of central bank's Emergency Liquidity Assistance as a lender of last resort
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Mahshid Shahchera *   |
| Monetary and Banking Research Institute, Central Bank , mahshidshahchera@yahoo.com |
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Abstract: (23 Views) |
| The reactions to the global financial crisis that started in 2007 and reached its peak in 2008 can be considered the beginning of new perspectives in financial markets. These responses included emergency liquidity assistance by the central bank and many restructuring and assistance programs for failed banks that included guarantees, capital increases, other forms of government support, etc. The widespread and excessive use of the concept of lender of last resort has been a defining and evolving feature of responses to various crises. Due to its multiple dimensions, this issue has influenced the economic and monetary policies of the central bank and can cause many problems for the banking and financial system. The purpose of the article is the need to review the payments that are made in the form of liquidity assistance to the banking system in the country. There are several frameworks in the world in this field, which are discussed in this article by examining the experiences of other countries at the time of liquidity assistance emergency and the importance of decision making and policy making. This article examines the interrelationship between banking stability and central bank liquidity assistance using dynamic panel data and data analysis. By examining the trend of regular overdrafts and facilities in Iran in order to provide liquidity to the banking system in the country, it can be noted that the role and functions of the central bank should be considered as the last resort. The results obtained in the research show that the central bank's liquidity assistance to banks with a lack of liquidity has had negative effects on the stability of the country's banking network. In this regard, access to the necessary strategies regarding the bankruptcy and recovery of weak banks is of particular importance. |
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| Keywords: lender of last resort, central bank, emergency liquidity assistance, weak banks |
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Full-Text [PDF 958 kb]
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Type of Study: Research |
Subject:
Special
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