to provide funding to private institutions, against vastly wider classes of collateral, were a key feature of the central bank response to the situation. in essence, when the private financial sector was suddenly under pressure to shrink its balance sheet, the central banks found themselves obliged to facilitate or slow the balance - sheet adjustment by changing the size of their own balance sheets. this is the appropriate response, as dictated by long traditions of central banking stretching back to bagehot. conceptually, at least initially, these balance - sheet operations could be seen as distinct from the overall monetary policy stance of the central bank. but as the crisis has gone on such distinctions have inevitably become much less clear as “ conventional ” monetary policy reached its limits. it was fortuitous for some, perhaps, that the zero - lower bound on nominal interest rates – modern parlance for what we learned about as the “ liquidity trap ” – had gone from being a text book curiosum to a real world problem in japan in the 1990s. japan subsequently pioneered the use of “ quantitative easing ” in the modern era. this provided some experiential base for other central banks when the recession that unfolded from late 2008 was so deep that there was insufficient scope to cut interest rates in response. so in addition to programs to provide funding to intermediaries in order to prevent a collapse of the financial system i note parenthetically that several important cross - border initiatives to manage liquidity pressures were put in place very quickly by key central banks. this kind of cooperation at a technical level is something at which the central banks are actually quite good. bis central bankers ’ speeches when market funding dried up, there have been programs of “ unconventional monetary policy ” in several major countries over recent years. these have been varyingly thought of as operating by one or more of : • reducing longer - term interest rates on sovereign or quasi - sovereign debt by “ taking duration out of the market ” once the overnight rate was effectively zero • reducing credit spreads applying to private sector securities ( “ credit easing ”, operating via the “ risk taking ” channel ) • adding to the stock of monetary assets held by the private sector ( the “ money ” channel, appealing to quantity theory notions of the transmission of monetary policy ) • in the euro area in particular, commitments to lower the spreads applying to certain sovereign borrowers in the currency union ( described as reducing “ re - denomination risk ” ). as a result of such policy innovation, the balance sheets of central

rba ’ s focus is on increasing competition to help further drive down payment costs. this is where giving merchants choice over which payment network is used – so called least - cost routing ( lcr ) – is particularly important and it is a priority of the payments system board. lcr allows merchants to choose the lowest - cost card network to process their debit transactions. it also increases the competitive pressure between the debit networks, providing greater incentives to lower the wholesale fees that are ultimately paid by merchants. this is especially important for small businesses that typically can ’ t negotiate discounted fees with the card schemes. for in - store transactions, least - cost routing is now available to 85 per cent of merchants, although only half of all merchants are actually using it. this low take - up suggests that the industry has more work to do in promoting the benefits to merchants. some financial institutions also have more work to do to complete their rollout and have not met the expected timetable. to provide greater transparency on how individual institutions are progressing, the rba will, next year, start publishing institution - level data on lcr availability and take - up. in terms of online payments, the payments system board expects least - cost routing to be available by the end of this year. overall, the industry is largely on track to meet this deadline. while there are some payment service providers that are running behind, most of these will have least - cost routing for online transactions up and running in the first half of 2023. as for in - person transactions, the rba will give public visibility to how individual institutions are performing. the next frontier for lcr is in - store mobile wallet transactions. over recent months, the rba has been consulting with the major mobile wallet providers, issuers, acquirers and terminal providers. on the basis of this consultation, the payments system board has formed the view that it would be both feasible and desirable for the industry to deliver lcr functionality for mobile wallet transactions by the end of 2024. the next step is for the mobile wallet providers to finalise their plans and share these plans with the industry so that the necessary investments across the payments ecosystem can get under way. overall, we are optimistic that least - cost routing will help counter the forces that are adding to merchants ’ payment costs, particularly for small businesses. looking ahead, other regulatory and market developments are expected to help increase competition and maintain the downward pressure on payment costs. modernisation of the payment systems (