“Intervention,” as the late - Charles Kindleberger4 said, “is an art form not a science.” My contention is that, whilst an aspect of such ambiguity may be inevitable, or even necessary, the demands of today’s complex world for enhanced predictability of behaviour and transparency should not be ignored. Ultimately public policy may require emergency liquidity injection through lender of last resort facilities. This may be justified to defend the public good of financial stability which the market itself cannot provide. I stress the word ultimately for this is a last resort after all other efforts have failed. The granting of any such support does, however, contain a basic dilemma. On the one hand there is a strong case for market discipline to avoid the dangers of moral hazard. This is the case for ambiguity as to whether and when the lender of last resort facility would be deployed. On the other hand people want predictability of process: who can be expected to do what if problems do arise? In the UK we are quite advanced in addressing these dilemmas. Our former Governor Sir Edward George, in a speech here at the London School of Economics in 1993, outlined the five key principles of lender of last resort assistance. They are equally valid today. To précis: explore every commercial option; ensure the key benefits come to the financial system not the shareholders; aim towards a clear exit; treat with care any details of the support given; and distinguish between problems of liquidity and solvency.
17 SR 18–8: Interagency Statement on Sharing Bank Secrecy Act Resources, Oct. 2, 2018. 6/6  BIS central bankers' speeches