1 Since the onset of the crisis in August of 2007, there has been a general global decline – and in some cases, a complete disappearance – of liquidity in key funding markets. Liquidity is essential for both the efficiency and the stability of the financial system, and this decline, especially in bank-funding liquidity, has been of great concern to central banks.
The liquidity of bank-funding markets is related to the liquidity of asset markets in general, and problems in one market can spill over into the other.