This is due to asymmetric information, the ever larger role of interbank markets and the well documented difficulty of economic agents in assessing and measuring risk over time. So, liquidity itself can become a contagion channel by triggering changes in asset prices, in the capital base of financial institutions, and thus by feedback into banks’ funding capacity.
12  Article 2 (4) of the law of 23 December 1998 concerning the monetary status and the Central Bank of Luxembourg. 13  Article 2 paragraphs 4 and 5 of the law of 23 December 1998 concerning the monetary status and the Central Bank of Luxembourg.