The setting of such a price may be driven by two opposing concerns. On the one hand, bolstering banks' solvency and capital base, which would call for a high price. On the other hand, minimising the cost for public finances, which would call for a low price and the intervention would mainly aim to ease liquidity constraints. •  The consequences for Europe are generally positive. The rapid implementation of the Plan may help to reduce pressure on markets and restore confidence among  BIS Review 129/2008  1  banks. However, it is important to pay close attention to the way in which it is rolled out. Indeed, by contagion, low prices could lead to further write-downs in the balance sheets of European banks. 2. A major shift in the direction of public policy  Liquidity problems remain crucial at this stage of the crisis. Interbank markets remain strained. Central banks have considerable firepower to deal with this. In this respect, a wide range of actions has been taken over the past few days. In addition to increasing allotment amounts and enhancing the provision of longer-term refinancing, recent actions enable the Eurosystem to provide unlimited euro and dollar liquidity through fixed-rate tenders. Furthermore, the expansion of the list of assets eligible as collateral considerably enhances the access of counterparties to Eurosystem liquidity. These exceptional measures aim to restore confidence and the smooth functioning of money markets. Central banks are closely monitoring this situation and remain ready to act.
Paul Tucker: Monetary strategy and prospects Speech by Mr Paul Tucker, Deputy Governor Financial Stability at the Bank of England, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Authority Board, at the Association for Financial Markets in Europe flagship conference on “Financing growth”, London, 24 September 2013. *  *  *  Around the western world monetary policy is at a critical juncture. As differences in the relative pace of recovery in different economies become apparent, each central bank is having to articulate how it sees the particular conditions it faces. Contrast that with early 2009, when we were all simply priming the monetary pumps to prevent our economies slipping into depression and deflation. Indeed, contrast it with 2011 and 2012 when, again, central banks acted more or less in unison to contain, as best we could, the spillovers from the crisis in the euro area periphery. Today, although normality is hardly restored, we are back to circumstances where differences in local economic conditions matter to domestic monetary prospects and to exchange rates. The big policy trade off In the UK, the core challenge lies in balancing two medium-term risks – to the economy’s productive capacity and to price stability.1 Concretely, the longer the weakness in activity, the greater the erosion of the economy’s capital resources and the damage to the skills and capabilities of our labour force.