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. Between December 2007 and March 2010, the Fed auctioned a total of $3.81 trillion collateralised funds, with maturities of 28 or 84 days.

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Topics:  Financial markets

Tags:  subprime crisis, liquidity risk, global crisis, term auction facility

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