While these standards have improved banks’ liquidity positions, they have also had two unintended consequences. The second side effect is that the Fed can no longer fulfil its role as lender-of-last-resort fully during periods of stress. Liquidity rules have heightened the stigma attached to the discount window, discouraging banks from using it or even preparing to do so. The aim of this is to destigmatise the emergency window and thereby restore the Fed’s ability to intervene during stress. However, another lesson from the 2023 banking run could potentially be overlooked: the need to broaden liquidity rules’ scope, which is currently very limited.

Source: The North Africa Journal March 31, 2026 08:09 UTC