Central bank as lender of last resort in the light of the problems of the czech economy

One of the main goals of the banking regulation and supervision is the promotion of the integrity, stability and health of the banking system as a whole. This also requires the mechanism, which would help some problem banks to gain lacking funds to meet the liquidity needs. Lender of last resort represents this mechanism. Although the aid may come from the special government institution or directly from the state budget, the role of lender of last resort is usually adopted by the central bank because of conviction that the failure of bank might have the "contagion effect" on the other banks. The emergency credits could be granted only to illiquid but solvent banks. In the article there are connected problems discussed - systemic risk, doctrine "too-large-to-fail", differences between the liquidity and solvency, and the main criteria for granting the emergency credits, with a view to the Czech banking system since 1993.

Keywords: monetary policy, bank, central bank, credit, regulation, supervision