This crisis hence has shown that the LOLR instrument loses much of its potency in a “bank run” from the asset side. 29. Let me explain. During the crisis, central banks pumped in enormous amounts of liquidity to defreeze the system through the LOLR window.
However, only about five or six of them have direct access to the supply of options from debt issuers; the others must depend on the interdealer market for a substantial portion of their supply.