Banks’ exposures to these entities are subject to prudential regulations. Seventh, the liquidity risks are contained by restricting the overnight unsecured market to banks and primary dealers (PDs), with prudential limits. The requirement of statutory liquidity ratio (SLR) for banks acts as a buffer for both liquidity and solvency of banks.
Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish. 4.