That authority must have access to liquidity to stabilize situations where necessary, but the fiscal authorities, not the central bank, should be the ones deciding whether to take on the credit risk of lending to troubled institutions in order to forestall financial instability. Fourth, transparency about unusual liquidity facilities is critical.
The public appropriately expects that when a central bank takes innovative actions – especially actions that might appear to involve more risk than normal lending operations – then it will receive enough information to judge whether the central bank has carried out the policy safely and fairly.