Without such initiatives, important market segments could fail to recover from the severe decline in activity caused by the current crisis. Such markets are important in allowing financial institutions to secure asset- based funding, expand lending and better distribute risk. They contribute to the efficiency of the economic system, and so a failure to revive them would entail considerable social costs. 6.
Conclusions  Let me conclude as I started – i.e. by following Milton Friedman in determining what a central bank both can and cannot do in a financial crisis. •  Central banks’ ability to contribute to the stability of the financial system is based on their unique capacity to create liquidity without constraints.