We had to tackle the collapse of private arbitrage, which meant that the market could not distribute liquidity across institutions and over time. This was the rationale for two main features of our extraordinary credit support. The full, unlimited accommodation of banks’ demands for central bank credit at our policy interest rate stepped into the breach when inter-bank lending collapsed.
The first consists of encouraging their expansion – and especially that of SMEs – so as to give them the best preparation to go international, including policies designed to foster their research and development efforts.