Liquidity regulation and the lender of last resort

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.