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The role of liquidity in systemic events provides yet another reason why, in the future, a more system wide or macroprudential approach to regulation is needed.

Among other objectives, liquidity guidelines must take into account the risks that inadequate liquidity planning by major financial firms pose for the broader financial system, and they must ensure that these firms do not become excessively reliant on liquidity support from the central bank.

The Central Bank should have a permanent window for discounting high quality securities where banks could go and discount these. It gives peace of mind to the banks. In the absence of this facility, what banks tend to do is to keep a liquidity cushion for emergency requirements. This is a very expensive way of managing liquidity.

One way to ease liquidity for banks is that the government can buy all highly rated securities held by the banks. Every single bank in the U.A.E. has some sovereign debts in their portfolios. I am not asking them to buy any junk bonds, rather the high quality U.A.E. government debt.

Hedge funds, private equity and venture capital funds have played an important role in providing liquidity to our financial system and improving the efficiency of capital markets. But as their role has grown, so have the risks they pose.

Our liquidity is fine. As a matter of fact, it's better than fine. It's strong.

The failure of Lehman Brothers demonstrated that liquidity provision by the Federal Reserve would not be sufficient to stop the crisis; substantial fiscal resources were necessary.

To the extent that bank panics interfere with normal flows of credit, they may affect the performance of the real economy.

As you know, in the latter part of 2008 and early 2009, the Federal Reserve took extraordinary steps to provide liquidity and support credit market functioning, including the establishment of a number of emergency lending facilities and the creation or extension of currency swap agreements with 14 central banks around the world.

The IMF is set up to deal with liquidity crises.