EVOLUTION OF THE CENTRAL BANK FUNCTIONS AMID THE FINANCIAL CRISIS

Abstract

Abstract. Monetary policy is one of the main functions of central banks. Till the latest financial
crisis it was a hereditary custom to attribute to central banks the function of a «lender
of last resort»: central banks are providing credits for commercial banks with temporary shortages
of liquidity – they lend freely, at a penalty rate and against good collateral. But in 2007

Anne Sibert and Willem Buiter coined the new definition of the central bank as a «market-maker
of last resort», and as if with a wave of a magic wand almost in a trice all top level central banks
started providing loans on the security of asset or mortgage backed securities (after reducing
interest rate nearly to zero).
This article is intended to analyze the background of the new function emergence and the
tools designed to its implementation at the current phase. The main point, attracting attention,
is the outcome of such large scale lending on the security of modern products of financial engineering
with negligible market value.
Key words: «lender of last resort», «market-maker of last resort», securitization, asset
backed securities, collateral.