The credit crisis has highlighted three serious problems in current liquidity arrangements.

First, during the worst of the crisis, even collateralised borrowing against investment-grade securities may not be available to a large institution facing actual or perceived solvency and liquidity pressures, as Bear Stearns, the US bank, learnt too late. The trend towards lower liquid-asset ratios and the shift from “owned” in favour of borrowed, just-in-time liquidity has exacerbated this vulnerability.