Yet more responses from the writer
It is a standard complaint of journalists that it's easier to write 2,000 words on a subject than 1,000 :) Glossary didn't make it to the first cut, but it's a reasonable request:
A brief summary of risk management.
Banks are required to keep a rainy day fund of money to cope with random shit. The riskier the position, the more money they need in this buffer. The regulations are a bit old ,and not very sophisticated, so much so that banks sometimes have more reserves than leghally necessary.
A simple portfolio loan requires the bank to have this buffer, to cope with bad debts, since of course the people that the bank borrowed the money from (which can be retail customers), will still want their money, regardless of the banks losses.
The capital required is expensive for bank, since they can't do anything risky with it, typically putting it into other banks or high grade/low yield bonds like those of major governments.
Thus "on the books" means the bank takes the full upside and full downside of any loan it makes.
If it sells the rights to receive the money, it can get a rake off, and let someone else take the risk. That means a high street bank is in effect a retailer of loans. Sainsburys is not the source of own-brand goods it sells, and Barclays is not the source of the money it lends. Both sell stuff.
Liquidity is the ability to buy and sell.
In many markets there are "market makers". They quote two prices, both to buy and to sell. This makes life a lot easier, and the spread between the bid price and offer price reflects the "service" a MM gives.
The property market does not have market makers, and most of us have suffered the pain that this causes. It takes a long time to sell things, and discovering prices is very hard, and imprecise.
However, you need decent amounts of capital to make a market, because you must hold a considerable amount of the stock, and have the pockets to deal with the screwups that happen. If like me you've ever been on a trading floor after hours, you will pick up phone calls of the form "hello, this is VeryBigBank, did you buy 3 million quids worth of bonds from us ?"
If the price of their stock holding drops hard, it can hurt badly. So they don't want to have too much.
Market makers, and other liquidity providers typically don't make big margins in their work. That means they are a bit cautious, since a small number of screwups can undo a year of profitable work. Getting market makers to actually make the market at all times is a standard problem, and I spent several years of my life embroiled in that situation.
Thus in a worried market, liquidity providers hide.
This means that people who want to get out of a position, can't. This means that the market sees lots of stock desparately trying to move, and a vicious circle may develop.
The actions of central banks is typically quite secretive, I did stuff for HM Treasury a while back and I was covered by the Official Secrets Act. In the words of the senior civil servant "we know where you live..."
But I pick up that they are providing liquidity, but with a very hard nose.
They are offering to buy stuff, but at a steep discount. My reading of this state of affairs is that the Fed and BoE may end up making a shed load of money out of this.