The Bank of England said it would complete its asset purchases ‘as soon as is operationally possible, consistent with improved market functioning’.18 The Federal Reserve said it would ‘purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning’.19 And the ECB framed its decisions in the context of ‘severe strains in the financial markets’ posing risks ‘of the ECB’s monetary policy transmission becoming significantly impaired’.20 Asset purchases have accounted for all of the net increase in Bank of England and Federal Reserve balance sheets since last Spring, and about half of the ECB’s. Many other central banks took similar actions.21  16  The Bank of England expanded its own lending facilities to include broker dealers and CCPs in 2014, in response to the recommendation of the Winters Review: https://www.bankofengland.co.uk/news/2014/november/widening-access-to-the-smf. 17 Lorie Logan of the New York Federal Reserve, for example, set out the US approach in a speech last October: https://www.newyorkfed.org/newsevents/speeches/2020/log201023 18 https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/monetary-policy-summary-for-the-special-monetarypolicy-committee-meeting-on-19-march-2020 19 https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm 20 https://www.ecb.europa.eu/press/accounts/2020/html/ecb.mg200409_1~baf4b2ad06.en.html 21 See for example ‘Central bank bond purchases in emerging market economies’ by Yavuz Arslan, Mathias Drehmann and Boris Hofmann, BIS Bulletin no.20 at: https://www.bis.org/publ/bisbull20.pdf. 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  Chart 4: Central bank balance sheet responses to the Covid-19 shock during 2020 Changes in components of central bank balance sheets since end-Feb 2020 (as % of 2019 nominal GDP)  Sources: Bank of England, Bureau of Economic Analysis, European Central Bank, Eurostat, Federal Reserve Board, ONS and Bank calculations.

From Lender of Last Resort to Market Maker of Last Resort via the dash for cash: why central banks need new tools for dealing with market dysfunction Speech given by Andrew Hauser, Executive Director, Markets  Reuters, London 7 January 2021  I am grateful to Tim Taylor for his assistance in writing this speech; and to Andrew Bailey, Imane Bakkar, Yuliya Baranova, Charlotte Barton, Alex Brazier, Jon Bridges, Alice Carr, Geoff Coppins, Ed Denbee, Johnny Elliot, Gerardo Ferrara, Bernat Gual-Ricard, Jon Hall, Sarah Hall, Nicholas Jackson, Joshua Jones, Anil Kashyap, Nick McLaren, Ankita Mehta, Matt Roberts-Sklar and Andrea Rosen for their comments and guidance. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction  Increasingly we look to financial markets, rather than banks, to care for our savings or provide credit. Millions save via pension, investment or exchange traded instruments. Companies and local authorities hold cash in money market funds. And firms, large and small, borrow from capital markets or non-bank lenders. Taken together, fully half of all financial assets are now held outside the banking system. These trends aren’t new – and to the extent that they bring broader access to cheaper, faster, and more diverse financial services, they’re good news. But they do pose novel challenges to financial stability. In particular, as its usage grows, market-based finance seems increasingly prone to liquidity shocks.