In such a context, there are two questions that arise for a central bank and that I would like to address tonight. First, how is monetary policy affected when the interbank market does not exist? Second, how can the interbank market be restarted?
The current money market environment is characterised by a high degree of mistrust among participants, based on general uncertainty and asymmetric information. I will argue that the public sector plays an important role in re-establishing confidence in the functioning of the interbank market, be it by re-shaping the market environment or by taking a temporary intermediation role.