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Search every verified Brad Jones interview, podcast appearance, and on-the-record quote — each transcript cross-checked by AI and human review to confirm speaker identity. In a December 2023 speech at the 36th Australasian Finance & Banking Conference, Brad Jones, Assistant Governor of the Reserve Bank of Australia, discussed the evolution of central bank lender-of-last-resort practices 150 years after Walter Bagehot's principles. Jones stated that maintaining financial stability has been a "cornerstone responsibility" for central banks, and that Bagehot's counsel to "lend early and freely to solvent firms against good collateral and at high rates" remains influential. He noted that since 2008, central banks have moved from "constructive ambiguity to constructive clarity" in communicating their emergency lending frameworks. Jones observed that last-resort lending has been used sparingly in Australia, with only a few instances since Federation, and that no Australian bank depositor has lost money since that time except for a small bank in the 1930s where depositors lost 1% of their deposits. He emphasized that central banks should not lend to insolvent institutions, calling this "close to an iron law in central banking." Jones warned that "the next major liquidity shock is a matter of when, not if," and that severe liquidity stress can emerge even when aggregate central bank reserves are abundant.
“Maintaining Financial stability has been a Cornerstone responsibility for central banks for as long as they've been in existence. The reason for this is twofold: One, Financial stability is a public good; two, central banks occupy a unique position at the heart of the financial system which reflects their ability to cr...”
“Bagehot offered his famous counsel that to avert Panic central banks should lend early and freely to solvent firms against good collateral and at high rates. Central to Bagehot's axiom was the idea that confidence could be enshrined and an unnecessary credit contraction averted by a conditional commitment from the cent...”
“Last Resort lending has been conducted sparingly in Australia since Federation. Last Resort loans have been extended only to the primary producers Bank in 1931 and to three Banks supporting a liquid building Societies in 1974 and 1979. The Reserve Bank also provided a liquidity facility to support the orderly takeover...”
“No Australian bank depositor has lost money since Federation with a single exception of depositors at one small Bank in the 1930s who lost just 1% of the value of their deposits.”
“Last Resort lending by central banks is fundamentally different involving the dire circumstance where stability of the financial system is in question. Central banks act as the backstop provider of emergency liquidity insurance to fundamentally sound institutions in bad states of the world.”
“Since 2008 central banks have had to confront a range of issues that were not addressed or foreseen in Bagehot's time. The most consequential development has been the formalization and more open communication of the framework for last resort operations, moving from constructive ambiguity to constructive clarity in publ...”
“The Reserve Bank always stands ready to quickly and significantly boost systemwide liquidity through open market operations with eligible counterparties. There is considerable flexibility in these operations, which can be introduced at short notice and conducted on a weekly, daily or intraday basis.”
“Central banks should not lend to insolvent institutions. This is close to an iron law in central banking because supporting fundamentally unsound institutions risks moral hazard, legal overreach, and worsens stigma problems for solvent institutions experiencing temporary liquidity shortages.”
“The Australian financial system has been less directly exposed to the risk of systemically important liquidity mismatches associated with investment funds compared to the US and UK. For example, Australian superannuation funds don't have runnable liabilities in the traditional sense and are more restricted in their cap...”
“The next major liquidity shock is a matter of when, not if. Financial system participants need to conduct their affairs with the expectation that large liquidity shocks will occur. Severe liquidity stress can emerge even in an environment of abundant central bank reserves, as the distribution of liquidity across instit...”
In this speech to the 36th Australasian Finance & Banking Conference on 14 December 2023, Brad Jones, Assistant Governor ...
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