The focus of the report was liquidity improvement actions and, in particular, the provision of cross-border liquidity. In an introduction, Donald Kohn, the Chairman of the CGFS and Vice Chairman of the Board of Governors of the US’s Federal Reserve System, says “The Study Group worked in real time, so to speak. The report was drafted while central banks closely monitored market developments and, more or less simultaneously, had to respond to the evolving challenges. Indeed, some of the specific recommendations discussed by the Study Group had already been implemented during the drafting period.”

The report comments that, whilst the central banks may have reduced the problems in the money markets, they did not resolve them, and that the successes came in the liquidity management area rather than in the problems of counterparties which it acknowledges are beyond its control. The report goes on to claim that communications with the markets was generally successful although there is room for improvement.

The report makes a number of recommendations, mainly of procedures and distribution processes, and comments that misinformation is a major source of market turmoil and that all central banks should take steps to improve their communications processes. They should also seek ways to reduce the stigma that can be attributed to banks that make use of central funding facilities. However, a major concern is that “the expectation that central banks will act to attenuate market malfunctioning may create moral hazard by weakening market participants’ incentives to manage liquidity prudently”. Central banks are asked to look closely at the incentives that regulated institutions have to manage their liquidity risk and introduce processes to strengthen these.