It is no exaggeration to say that central banks have become the best friends of banks’ liquidity risk managers. Second, central banks have learned that their own financial risk management is crucial if they are to deliver, in a prudent manner, the best possible liquidity support for strained markets and financial institutions.
While central banks have certainly done a lot, there are no shortage of proposals for other things that central banks should do. Having the ability to create unlimited purchasing power at short notice without being constrained by internal liquidity considerations, central banks have often been regarded as having limitless power to resolve economic crises.