1/3  BIS - Central bankers' speeches  The pandemic experience demonstrated the effectiveness of lending programs designed to serve as backstops to support market functioning and the flow of credit in times of stress. The temporary nature of loans from lending facilities activated only under financial market stress adds to the attractiveness of these tools.
Lending programs are most effective as backstops when loans are offered at a penalty rate and are of short duration. When appropriately calibrated, lending programs can help promote market functioning but limit the Federal Reserve's overall footprint in financial markets in the longer term.