The banking system is modeled in a closed system of financial accounts, whereby the equilibrium volume of bank intermediation between households and corporates reflects structural parameters such as household preferences, comparative cost structures of heterogeneous banks, loan demand of...

After the Lehman default, but also during the euro area sovereign debt crisis, central banks have tended to extend the ability of banks to take recourse to central bank credit operations through changes of the collateral framework (e.g. CGFS, 2008 – in consistence with previous narratives,...

On 1 June 2018 the ECB celebrated its 20th anniversary. This paper provides a comprehensive view of the ECB's monetary policy over these two decades. The first section provides a chronological account of the macroeconomic and monetary policy developments in the euro area since the adoption of...

The paper studies the central bank collateral framework and its impact on banks’ liquidity under an adverse stress test scenario. We construct a stress test model that accounts for a granular and multi-faceted representation of the liquidity of marketable and non-marketable assets. In...

Containing short-term volatility of the overnight interest rate is normally considered the main objective of central bank standing facilities. This paper develops a simple stochastic model to show how the width of the central bank standing facilities corridor affects banks' day-to-day liquidity...

This paper analyses the potential roles of bank asset fire sales and recourse to central bank credit to ensure banks' funding liquidity and solvency. Both asset liquidity and central bank haircuts are modelled as power functions within the unit interval. Funding stability is captured as...

Even before their deployment in major economies, one of the concerns that has been voiced about central bank digital currency (CBDC) is that it might be too successful and lead to bank disintermediation, which could intensify further in the case of a banking crisis. Some also argue that CBDC...

In some recent studies, the question of the origins of central banking has been revisited, suggesting that beyond Swedish and British central banking, a number of earlier European continental institutions would also have played an important role. However, it has often been difficult to access...

This paper reviews the role and effects of the collateral framework which central banks, and in particular the Eurosystem, use in conducting temporary monetary policy operations. First, the paper explains the design of such a framework from the perspective of risk mitigation, which is the...

This report summarises the findings of the task force. It is organised as follows. Section 2 starts with a discussion of the relevance of credit risk for central banks. It is followed by a short introduction to credit risk models, parameters and systems in Section 3, focusing on models used by...