The crisis and the ECB’s monetary policy The epicentre of the crisis in the initial phase was liquidity, an economic measure that had been neglected by the theory for many years since a lack thereof seemed so unlikely. The day after Lehman Brothers collapsed, the money markets stopped functioning. The liquidity required by banks to refinance their maturing assets suddenly became extremely scarce.
Generally speaking, banks borrow at short-term or very short-term from savers with a strong preference for the immediate availability of funds, or for “liquidity”. If savers suddenly refuse to roll over their deposits with the banks, the banks then attempt to discontinue the credit that they supply to the economy.