the liquidity in the banking sector diminishes leaving banks prone to credit contraction; there is risk of insolvency or even bank runs; the maintenance of financial intermediation and stability of the whole financial system is in jeopardy.
It involved direct purchases of financial assets. Its key aim was to lower the benchmark yield curve and boost economic activity. It is almost always used when the policy interest rates are closing to zero.
It involves direct or indirect provision of credit by the central bank to targeted borrowers and becomes necessary in case of the credit markets breakdown. Most often its aim is to reduce credit spreads in sectors of high macroeconomic importance.