The Bank took these measures based on its recognition that a decline in the functioning of CP and corporate bond markets was causing a tightening of overall corporate financing conditions. These measures are expected to encourage financial institutions to sell CP and corporate bonds they hold and thus expand their lending capacity.
The Bank's outright purchases of corporate debt, however, involve a relatively higher probability of imposing costs on taxpayers by incurring losses, and deepen the involvement of the Bank in microeconomic resource allocation among individual firms.