From August 2007 , when the first signs of financial and banking crisis quickly became world, and throughout 2008, central banks have tried to curb its growth by providing exceptional liquidity to banks, cash than it n ‘ came over to find the interbank market because of the suspicion of banks each vis-à-vis others. The Central Bank of the United States (EDF) began a fast downward movement of interest rates as the European Central Bank has not undertaken until much later in 2008 (she favored the risk of inflation still relatively high at this time ). Meanwhile the banks most at risk from a lack of their own funds (solvency crisis) given the losses already recorded and predictable, including U.S. banks, the epicenter of the quake, seek the sovereign wealth funds to subscribe to capital increases. But nothing helped.
In the fall of 2008 , the international financial system is hit hard by a sudden worsening of the crisis. Global systemic crisis threatens to break out. Governments and central banks then intervened massively to save the banking system. Perhaps the most comprehensive plan of actions coordinated public international leads in peacetime.
The action of central banks
The central banks are accentuated features already implemented to offer financial institutions a privileged access to unlimited amounts of liquidity. This policy was particularly manifested by a lengthening of refinancing facilities, easier to use a foreign currency financing. They also dropped an outstanding all policy rates (in February 2010, we are always at 1% for the ECB, 0.25% for the Fed, 0.50% for the Bank of England, 0.1% in Japan ).
Unconventional measures
However, faced with an accelerating deterioration in the markets, central banks have found themselves forced to override the way “traditional” transmission of monetary policy by adopting measures so-called “unconventional”. As early as December 2008, the Fed sets the stage and in January 2009, the Bank of England did the same, and in June 2009, the ECB follows the lead of its counterparts.
These measures are then massively increase the quantity of money circulating in the economy, and to unblock credit markets by purchasing securities directly in these markets and by substituting in some way directly to banks to finance the economy. It should be noted that ECB and FED use to varying these unconventional measures. The Eurosystem aims primarily to meet the financing needs of banks (via loans at 3 months), and the interbank market. The U.S. FED Bank of England or lean on the risky securities and do not hesitate to buy bonds
Public policy
The measures are to support the financing of the banks have been implemented following the guidelines established by the G7 on 10 October 2008 in Washington. The actions of the states have so oriented around four themes: the establishment of provisions precedent in the application of accounting standards aggravate the difficulties of international banks, a government guarantee to help credit institutions to find funding and a strengthening of the capital of banks and even a stake in the state capital of financial institutions, supporting institutions of times in near bankruptcy or in serious difficulties by other banks.
Strengthening bank’s capital
The European rescue plan also provided for strengthening the capital adequacy of credit institutions by the state. Again, several methods are emerging. However, most of them involve the purchase of securities issued by banks or if the entry of the state capital of some institutions.