As you probably know, he later wrote a famous book, Lombard Street, a treatise on the best central bank practices, providing the first-ever systematic analysis of the roles of a central bank.
In the book, he formulated what came to be called Bagehot’s rule, namely that, to prevent disruption in the financial system in times of crisis, the central bank should act as a lender of last resort, providing unlimited funds at punitive rates.2 The practical application of Bagehot’s rule has been modified in line with changes in financial market structures, and in the recent global financial crisis, central banks – including the ECB and the Bank of Japan – aggressively provided funds to the markets as the lender of last resort, thereby preventing a collapse of the financial system.