VOX  CEPR Policy Portal

Among the tools used by central banks to tame the financial crisis, some – such as haircuts applied by the central bank to the collateral posted at its provision of central liquidity to the banking system – have gone largely unnoticed. This column introduces a liquidity mismatch index to quantify the extent to which central banks effectively supported bank liquidity. The analysis suggests that in the case of French banks, the ECB alleviated banks’ liquidity mismatch significantly between 2011 and 2015.