Banks were in demand, both on the prospects for positive updates during the current reporting season and on reports that the government might ease bank liquidity rules, potentially saving them many millions of pounds.
"Unfortunately, the credit risk was so large that the liquidity couldn't save them," said Mr. Siddique, now a director for Deloitte.
As the chart below nicely illustrates, capital is important but liquidity is what saved the system.
In 2007, car sales in Venezuela, fueled by a massive increase in liquidity and negative interest rates that make saving a mug's game, rose by 81% from the year before.
The Fed also made clear in the Fed minutes that on Feb. 1, most of the Fed's special liquidity facilities, initiated to save Wall Street from foundering in the fall of 2008, would be folded.
One initiative alone, the Term Liquidity Guarantee Program, likely saved banks an estimated $24 billion in borrowing costs.
More families said they were saving money as a precautionary measure, to make sure they had enough liquidity to meet short-term needs.
We study two designs for a liquidity-saving mechanism (LSM), a queuing arrangement used with an interbank settlement system.
This paper studies the incentives of participants in a real-time gross settlement system with and without the addition of a liquidity-saving mechanism (LSM).
The announcement of Project Inthanon says: "The BOT and the participating banks will collaboratively design and develop a proof-of-concept prototype for wholesale funds transfer by issuing wholesale Central Bank Digital Currency Wholesale CBDCC)." Phase 1 of Project Inthanon will involve development and testing of key payment features such as a liquidity-saving mechanism and risk management.
Liquidity is abundant because the region saves so much.
