Central banks should take on more credit risk during stress – BoE paper

Research claims generous credit terms can be more efficient than cutting the risk-free interest rate

Bank of England
Photo: Juno Snowdon Photography

Central banks should consider taking on greater levels of credit risks and lend to risky market participants at more favourable rates during times of stress, according to a Bank of England staff working paper published on June 23.

The paper, Collateral requirements in central bank lending, uses a model of central bank intervention in collateralised credit markets that combines credit and leverage cycle approaches to demonstrate that when a downturn “is severe”, it is “optimal” for the central

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe

You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Central Banking? View our subscription options

Register for Central Banking

All fields are mandatory unless otherwise highlighted

This address will be used to create your account

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account

.