Banks could lessen liquidity risk through creating securities which would pay out if interbank spreads are above a certain level, two economists at the Bank of Italy have said.
Writing for VoxEU.org, an economics blog, on Friday Sergio Nicoletti-Altimari, the director of the central bank's economic outlook and monetary policy unit, and Carmelo Salleo, a senior economist there, said banks should be encouraged to create what they dubbed "roll-over option facilities", or Roofs, with the aim of usin
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