The wild market volatility in March/April 2020, unleashed by government measures to cushion the impact of Covid-19, revealed fragilities in the financial system, particularly with non-bank financial institutions, which hold around half of the world’s financial assets. The subsequent dash for cash left many gasping for liquidity.
Many open-ended funds vested in illiquid assets struggled to meet investor redemptions, for instance. Traditional banks, although well capitalised, were unable to fully step into the breach, requiring direct central bank intervention to stabilise markets via one-way asset purchases.
