This paper analyzes whether the Lender of Last Resort function has changed in consequence of the recent Global Financial Crisis. The unprecedented emergency actions of the Federal Reserve, European Central Bank and the Bank of England are analyzed in terms of Walter Bagehot's traditional Lender of Last Resort doctrine. The central banks' actions are compared to identify the extensions and paint a general picture of the modern and much more comprehensive Lender of Last Resort function, which includes provision of liquidity and collateral, lowering interest rates and expansionary monetary policy, loosening collateral standards, supporting critical institutions, opening special liquidity facilities that target specific markets or groups of agents, and becoming market maker of last resort and buyer of last resort. The Lender of Last Resort function has been found to have changed.
Lender of Last Resort Walter Bagehot's Lombard Street penalty rate secure collateral solvency and illiquidity monetary policy Federal Reserve Bank European Central Bank Bank of England Market Maker of Last Resort quantitative easing Buyer of Last Resort