The Term Auction Facility effect on liquidity risk exposure

Stefano Puddu, Andreas Wälchli, 12 December 2012

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As the interbank credit market was under serious stress at the end of 2007, the Federal Reserve launched the Term Auction Facility (TAF) with the aim of injecting liquidity into the interbank market. Cecchetti (2007) explains that banks were reluctant to lend to other banks, mainly because of uncertainty about the asset quality on the balance sheets of the potential borrowers.

Topics: Financial markets
Tags: global crisis, liquidity risk, subprime crisis, term auction facility

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