Despite this less-than-ideal starting position, the Bank ultimately embraced the provision of liquidity to the system over the course of the crisis, with the expressed aim of reducing the costs of disruption to critical financial services. This came about via an alphabet soup of schemes, including DWF, ECTR, ELTR, FLS, ILTR, and SLS. 3 Common to all was a  2  See Plenderleith (2012) for details of episodes of lender of last resort since 1973. 3  More information about these schemes is available on the Bank’s website: http://www.bankofengland.co.uk. BIS central bankers’ speeches  3  recognition that to achieve its aim, the Bank needed to provide liquidity against a wider range of collateral, to a wider range of counterparties, for a longer term. Two other innovations are noteworthy. •  First, in some circumstances the Bank lent in a currency other than sterling – a first for our liquidity insurance operations. 4  •  Second, the Bank acted as a market maker of last resort in the sterling corporate funding markets – making small targeted purchases and sales of commercial paper and corporate bonds. 5  Many of these changes were made in the heat of the crisis. And since the 2012 Winters and Plenderleith Reviews 6 much effort has been exerted in hardwiring them into our operating framework to make it clear to market participants how we would act in future.
These have, inter alia, (i) reintroduced prudential filters to neutralise the effect of the change in the value of public debt on capital; (ii) allowed reserves at central banks to be excluded from the leverage ratio calculation; (iv) incorporated a favourable provisioning treatment for exposures with public guarantees; (v) brought forward the entry into force of certain measures, such as the supporting factor for SMEs and the new prudential treatment of software; and (v) allowed market model overshootings to be ignored, given the volatility arising from the COVID crisis. 5  As regards the usability of buffers, the BCBS, the European Banking Authority (EBA) and the SSM have in various statements referred to the objective pursued with the introduction of liquidity and capital buffers in Basel III, reiterating that such buffers may be used appropriately to support the economy in a situation like the current one. Also, the message has been conveyed that supervisors will allow sufficient time for these buffers to be replenished. At the same time, the BCBS and the EBA have published technical guidelines on the prudential treatment of guarantees and moratoria, clarifying that the flexibility required by the current health situation must not be at the expense of the prudence needed when recognising and provisioning for non-performing loans.