Without clearer guide rails of this kind, we are destined to proceed somewhat messily from crisis to crisis, building a framework by circumstance rather than by design. Second, we need to work towards a more developed understanding of the tools that central banks need to deal with this new era of liquidity risk, and in particular the right mix between lending and asset buy/sell facilities required in different scenarios. Most of us share the instinct that lending tools are the right place to start – but progress on defining the set of non-bank firms that are needed, able and appropriately incentivised to participate has so far been limited. And there are important debates to be had about the regulatory perimeter. Whether a steady state  Page 13  toolkit will require buy/sell tools is an important debate – but at the very least it does seem that we are going to need to be able to reach for ‘break glass’ versions of such tools until and if more developed repo facilities are developed. Third, we need to debate the relative merits of standing vs discretionary facilities. Appropriately designed standing facilities could help reduce the incidence of future liquidity crises, by clarifying the circumstances in which public assistance would be available, replacing the sort of crude guesswork that constructive ambiguity can generate, and incentivising more effective self-insurance. But calibrating them accurately, and ensuring they are ready to function, requires sharply improved levels of understanding and operational readiness.
Arjuna Mahendran: The latest financial crisis and Sri Lanka Speech by Mr Arjuna Mahendran, Governor of the Central Bank of Sri Lanka, at the International Research Conference, Colombo, 7 December 2015. *  *  *  Professor Yi Fu Lin, Dr. Harsha De Silva, distinguished delegates, ladies and gentlemen. Welcome to this 8th research conference by the Central Bank of Sri Lanka. I must congratulate Dr. Nandalal Weerasinghe and his colleagues who have developed this tradition which in no small way has established the Central Bank of Sri Lanka on the international research map as a meeting place for the profound minds of several leading academic and banking institutions. This conference itself is no small feat to have organized given that we have participants from several parts of the world in Europe and Asia including several areas that we have very strong relationship with as a country, and I think this is a great testimony to the continuing tradition that we have evolved in the Central Bank in terms of creating another center of excellence in Sri Lanka. In my opening remarks I thought I would perhaps take a leaf from Professor Lin’s commentary just now, and perhaps adapt Sri Lanka’s situation in terms of the structuralism or the lack of it that Professor Lin discussed. Now when you look at the total economy, we have in the last five years gone through a fairly challenging period.