Then I'll describe developments in the thinking on the procyclicality of the financial system – particularly that of financial markets and financial market prices. The Bank of Canada's liquidity policy response to the crisis Last August, about one year into the crisis, I provided an overview of the changes that the Bank had made to its liquidity policies.
1 Since the onset of the crisis in August of 2007, there has been a general global decline – and in some cases, a complete disappearance – of liquidity in key funding markets. Liquidity is essential for both the efficiency and the stability of the financial system, and this decline, especially in bank-funding liquidity, has been of great concern to central banks.