This measure greatly attenuated the maturity mismatch between assets and liabilities in banks’ books, which would otherwise have further deterred bank lending activity. We have also been providing foreign exchange liquidity. This primarily took the form of US dollar liquidity backed by a swap facility with the US Federal Reserve System.
But on the other hand banks have been reducing the size of their trading books, partly as a result of stricter regulation. This shift in market forces is not a major issue when times are good and markets are quiet. But market liquidity can be a bottleneck in times of stress, when many investors are scrambling to square their positions at the same time.