Rethinking banks' liquidity requirements

Highlights

• The 2023 banking turmoil underscored the complementarity of self-insurance-oriented minimum liquidity requirements and central bank liquidity support in safeguarding financial stability.
• Despite their complementary nature, these two core components of the policy framework are often treated separately. 
• This paper proposes a framework bridging both components, with the objective of providing a flexible approach to address extreme liquidity stress.