-  Purchases typically took place at prevailing market prices: ie the Bagehot principle was not applied.22 While not charging an ‘insurance premium’ to market participants for an extended period may be understandable in a severe unexpected pandemic, it would be harder to justify providing  22  Arguably this was not true at the very height of the dysfunction, when central banks were buying at prices well below pre-stress levels. But this behaviour was not expected by the market ex ante, and prices of government securities in most markets bounced back rapidly following the initial central bank interventions. 9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  market participants with an expectation of similarly-priced public support if market dysfunction occurred because of well-understood vulnerabilities. -  A key part of the success of the Covid asset purchase programmes was that they took large quantities of risk off private sector balance sheets, meeting the heightened demand by non-banks for cash and allowing intermediaries to return to providing finance to the real economy. At the same time, of course, that means more risk on public sector balance sheets. ‘Whatever it takes’ may apply in a global pandemic. But public authorities will be more sensitive to the cost to the public purse if future episodes of market dysfunction emerge because of vulnerabilities in the system. -  The Covid response was unanticipated and discretionary.

6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  Chart 3: Holdings in Corporate Bond Secondary Market Scheme  Source: Bank of England  The review of the Bank’s liquidity framework carried out by Bill Winters in 2012 recommended formalising the Bank’s approach to MMLR, setting out public principles under which future interventions might occur.13 Various proposals on these points had been made in the wake of the GFC, by – amongst others – Paul Tucker, Perry Mehrling, Michael Dooley and Stephen Cecchetti.14 But in the event, the Bank – in common with other central banks – chose to say relatively little in public. That reflected a number of factors, including the practical challenges of determining in advance the markets in which central banks might operate, the terms on which they would do so, and the consequences for public money. In the years that followed, the topic received little active attention, either inside or outside central banks. II)  Covid, market dysfunction and central bank interventions  The experience of Covid has changed that. This is not the place to review the actions taken by central banks since last Spring in detail: many have covered that elsewhere.15 Instead, I want to pull out a number of lessons from that experience that, directly or indirectly, can help inform future tool design. 13  https://www.bankofengland.co.uk/-/media/boe/files/news/2012/november/the-banks-framework-for-providing-liquidity-to-the-banking See for example https://www.bankofengland.co.uk/speech/2009/last-resort-lending-market-making-and-capital, https://press.princeton.edu/books/hardcover/9780691143989/the-new-lombard-street, and the papers from the 2014 workshop on ‘Rethinking the lender of last resort’ held at the Bank for International Settlements (https://www.bis.org/publ/bppdf/bispap79.pdf).