## Emergency Liquidity Support Facilities

_IMF Working Papers, April 1, 2000_

## Source details

**Canonical URL:** [Emergency Liquidity Support Facilities](https://www.imf.org/en/publications/wp/issues/2016/12/30/emergency-liquidity-support-facilities-3542)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/emergency-liquidity-support-facilities-3542/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/30/emergency-liquidity-support-facilities-3542/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/30/emergency-liquidity-support-facilities-3542/bundle-manifest.json)

## Bibliographic details
- Authors: Dong He
- Published: April 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451850192.001

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### Summary
- This paper discusses operational aspects of official emergency liquidity support to individual institutions under stress.
- It argues that properly designed lending procedures, clearly laid-out authority and accountability, as well as disclosures rules, will:
  - promote financial stability,
  - reduce moral hazard,
  - and protect the lender of last resort from undue political pressure.
- Although there may well be good reasons to maintain ambiguity over the conditions for assistance, there are important advantages for developing, and for transition economies to follow a rule-based approach by setting out ex ante the necessary conditions for support, while maintaining that meeting such conditions is not sufficient for receiving support.

### Major arguments and operational considerations
- Properly designed lending procedures:
  - clarify operational implementation of emergency liquidity support.
- Clearly laid-out authority and accountability:
  - help to insulate the lender of last resort from undue political pressure.
- Disclosure rules:
  - can contribute to reducing moral hazard and enhancing financial stability.
- Ambiguity versus rule-based approaches:
  - Ambiguity over conditions for assistance can be justified in some cases.
  - Important advantages exist for developing and transition economies to adopt a rule-based approach that sets out ex ante necessary conditions for support, with the caveat that meeting such conditions is not sufficient for receiving support.

### Policy recommendations and implications
- Design and adopt lending procedures that are transparent and operationally clear.
- Establish and document authority and accountability frameworks for emergency liquidity support decisions.
- Implement disclosure rules that balance transparency with the need to avoid exacerbating runs or moral hazard.
- For developing and transition economies, consider specifying ex ante necessary conditions for support within a rule-based framework, while retaining discretion so that satisfying those conditions does not automatically guarantee assistance.

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## Content in this bundle

- **Emergency Liquidity Support Facilities - WP/00/79**
  - [Emergency Liquidity Support Facilities - WP/00/79 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2000/_wp0079.pdf.md){rel="alternate" type="text/markdown"}
  - [Emergency Liquidity Support Facilities - WP/00/79 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2000/_wp0079.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/emergency-liquidity-support-facilities-3542_