This expansion of facilities was needed to ensure that the financial system remained liquid and that institutions could continue to make payments as required without creating undue stress in the interbank market. In particular, as the banks’ access to global markets became very restricted in late 2008–early 2009, the Reserve Bank provided access to term funding secured over mortgage backed securities.
The banks also increased their use of parent funding during this period. With the crisis behind us, we have been reconsidering the appropriate role and scope of the Reserve Bank’s liquidity facilities. The crisis has demonstrated the value of liquidity support for fundamentally sound institutions in the face of systemic market disruptions.