
Contents
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10.1 Bank of England 10.1 Bank of England
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10.1.1 Sterling Monetary Framework 10.1.1 Sterling Monetary Framework
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10.1.2 Participation in the Sterling Monetary Framework and Acceptable Collateral 10.1.2 Participation in the Sterling Monetary Framework and Acceptable Collateral
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10.1.3 Discount Window Lending 10.1.3 Discount Window Lending
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10.1.4 Contingent Term Repo Facility Lending 10.1.4 Contingent Term Repo Facility Lending
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10.1.5 Emergency Liquidity Assistance 10.1.5 Emergency Liquidity Assistance
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10.1.6 ELA Assistance to Solvent Banks and Nonbanks 10.1.6 ELA Assistance to Solvent Banks and Nonbanks
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10.1.7 Lending at Treasury Direction 10.1.7 Lending at Treasury Direction
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10.2 European Central Bank 10.2 European Central Bank
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10.2.1 Emergency Liquidity Assistance 10.2.1 Emergency Liquidity Assistance
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10.2.2 ECB and European Commission Authority to Restrict NCB LLR 10.2.2 ECB and European Commission Authority to Restrict NCB LLR
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10.2.3 Liquidity via ECB Monetary Policy Operations 10.2.3 Liquidity via ECB Monetary Policy Operations
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10.2.4 Long-Term Refinancing Operations 10.2.4 Long-Term Refinancing Operations
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10.2.5 Purchasing Programs 10.2.5 Purchasing Programs
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10.3 Bank of Japan 10.3 Bank of Japan
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10.3.1 Article 33 10.3.1 Article 33
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10.3.2 Article 38 10.3.2 Article 38
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10.3.3 Article 37 10.3.3 Article 37
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10.3.4 Article 44 10.3.4 Article 44
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10.4 Comparison of LLR Powers of the Four Central Banks 10.4 Comparison of LLR Powers of the Four Central Banks
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10.4.1 Independence 10.4.1 Independence
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10.4.2 Ability to Lend to Nonbanks and Supervisory Authority 10.4.2 Ability to Lend to Nonbanks and Supervisory Authority
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10.4.3 Regime Structure 10.4.3 Regime Structure
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10.4.4 Collateral 10.4.4 Collateral
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10.4.5 Requirement of Solvency 10.4.5 Requirement of Solvency
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10.4.6 Treasury Approval or Direction 10.4.6 Treasury Approval or Direction
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10.4.7 Need for a “Broad Program” 10.4.7 Need for a “Broad Program”
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10.4.8 Disclosure Requirements 10.4.8 Disclosure Requirements
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10.4.9 Using Discount Window Proceeds to Lend to Affiliates 10.4.9 Using Discount Window Proceeds to Lend to Affiliates
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10 Comparison of LLR Powers of Fed with Bank of England, European Central Bank, and Bank of Japan
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Published:June 2016
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Abstract
The Fed's three major peers are the Bank of England (BOE), the European Central Bank, and the Bank of Japan (BOJ). This chapter begins with a description of the powers of the three peer central banks. It then compares their powers with those of the Fed. It argues that institutionally the United States grants by far the weakest lender-of-last-resort (LLR) powers to its central bank, particularly with respect to nonbanks: (1) its independence is more fragile; (2) it is the only country with special limitations on lending to nonbanks as compared with banks; (3) it is the only country, outside the Eurozone, that makes no provision for loans to institutions the central bank does not judge as solvent; (4) while the BOE and BOJ require Treasury approval or direction for emergency lending, such requirements are likely to be much less politicized than the US Treasury approval of loans to nonbanks; (5) it is the only country that places restrictions on banks using discount window loans to support affiliates; (6) it is the only country requiring that there be a broad program for borrowing by nonbanks; and (7) it is the most aggressive country in requiring disclosure, thereby possibly inhibiting borrowers from borrowing due to the associated stigma. All but the first point results from changes by Dodd–Frank. This US weakness is not likely to be rectified in the near future given the politics surrounding bailouts.
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