United States Senate, Committee on Banking, Housing, and Urban Affairs. The Bank of Japan seems to have sought the arrangement for emergency loans from the U.S. Federal Reserve because of three basic concerns. Reuters Newswire Service. October 18, 1995. Banking specialists in the United States indicate that emergency loans by the Federal Reserve, or any central bank, to meet short-term liquidity needs of individual banks are not unusual.
Central banks are leaders of last resort.
In Japan's case, the arrangement seems to be a precautionary measure, rather than an indicator that major liquidity problems in Japanese banks are imminent. While the Daiwa problem appears to be a special case, the fear is that Japanese banks, in general, may not 6. Congressional Research Service. CRS Report No. 95-114 E, updated December 19, 1995.