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IMF's Vinals says central banks may have to be "market makers"

[LONDON] Central banks may need to become"market makers of last resort" if there is not enough liquidity during volatile sell-offs, a senior International Monetary Fund official said on Thursday.

Jose Vinals, director of the IMF's capital markets department, said market liquidity has shrunk as capital requirements on banks increased but there was no simple relation between the two.

It was also unclear whether markets were simply more volatile or whether there were systemic consequences, but it would take time to find a solution, Mr Vinals said.

"The time it takes for the global regulatory community and central banking world to find a solution this time may be longer than the time where one episode of big illiquidity happens," Mr Vinals told a meeting of the International Organization of Securities Commission (IOSCO) in London.

"Then the question is what to do. In my view the only thing that can be done at that time is that central banks should become again market makers of last resort."