Second, central banks should have a sufficient capital buffer of their own and appropriate burden-sharing agreements or understandings with the government to guard against possible credit losses. The latter is of the utmost importance to maintain central banks’ credibility in pursuing price stability. Besides these considerations, there were four practical principles in considering unconventional policies, which produced both differences and similarities among countries.
Principle 1. Select and concentrate Although dysfunction was widespread, it was clear that no central bank had the operational capacity and capital buffer to intervene in all markets showing dysfunction. It was also evident that some markets were more important than others for the purpose of restoring the monetary transmission mechanism.