<P> Other less than comprehensive mechanisms have been proposed but not adopted . The first is International or Sovereign Bankruptcy, which would impose a stay on payments by a country in crisis . The second involves the use of credit lines for sovereigns to draw upon in times of crisis . A flexible credit line (FCL) would be made available with few or no conditions to countries with very sound economic and financial policies, while a precautionary credit line (PCL) could be made available to countries that do not meet FCL criteria but nonetheless display essentially sound policies . In contrast to FCL provisions, countries drawing on the PCL would be subject to policy conditions . A third proposal, broader and less clearly defined, calls for a global stabilization mechanism whereby the IMF could temporarily use an expanded "tool kit," with instruments including the unilateral offer of FCLs for multiple qualifying countries as well as other special facilities and relaxations of the terms of existing facilities . </P> <P> A variety of rationales have been offered for the creation of an ILLR . Particularly prominent in recent years is offering countries an alternative to self - insurance through accumulation of foreign exchange reserves, which, in spite of a high cost of carry, has been widely practiced in emerging economies since the 1997 Asian financial crisis, the 1998 Russian financial crisis and the 1998 bailout of Long - Term Capital Management . An ILLR might also provide a cushion against shocks and volatility, as well as reduce the likelihood of financial panic within countries and financial contagion across countries . Moreover, an ILLR might allow a country's Central Bank to shift their holdings from liquid but low - yielding foreign exchange reserve to less liquid but longer - term and higher - yield assets . Finally, having an ILLR with established rules and procedures in place before a crisis might make collective action problems less likely than in the case of an exclusively ex post response . </P> <P> The role and suggested functions of an ILLR in a crisis like domestic lender of last resort, as set forth by Walter Bagehot and subsequent authors, are the following: i) lending against any marketable collateral (finance) valued at its value in normal times; ii) lending in large amounts (on demand) at terms steeper than at market terms in normal times; and iii) establish the above principles ex-ante and applying them automatically . The functions of an ILLR could be undertaken by a new institution such as a global central bank, but current proposals have generally suggested the creation of a fund or facility within an existing institution, particularly the International Monetary Fund . A leading role has also occasionally been suggested for the Bank for International Settlements . Less consensus exists on whether an ILLR should additionally assume the functions of a crisis manager by coordinating the responses of other relevant actors . Disagreement likewise exists regarding whether an ILLR should directly provide international liquidity to a country's financial institutions or should only provide liquidity to institutions serving as a country's financial safety nets . Based on the traditional doctrine, four desirable aspects of a feasible ILLR can be set forth: </P> <Ul> <Li> Large size: Sufficient to meet short - term financial obligations and avoid a collapse (either of demand or supply); </Li> <Li> Expediency: Timely, immediate disbursements to prevent crises rather than cure their consequences or, if already underway, mitigate and resolve them at minimum cost; </Li> <Li> Certainty: Automatic (i.e., non-discretionary) financial assistance according to pre-arranged mechanisms and conditions with adequate repayment period to match extraordinary financial need; uncertainty undermines confidence that ILLR will do its job, leads to defensive positioning of stakeholders in anticipation of crisis and, therefore, breeds self - fulfilling crises . </Li> <Li> An exit strategy: Constant monitoring of whether liquidity provision fails to restore normalcy or fundamentals continue to deteriorate in order to be prepared to change diagnosis on the nature of the financial crisis and switch to alternative interventions to strengthen solvency . </Li> </Ul>

The international institution that serves as a lender of last resort is called the