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Mar 6, 2024 · March 6, 2024. By Sean Coyne, Solutions Consulting Principal, Treasury & Capital Markets, Finastra. After being awash with liquidity over the last decade, 2023 proved to be a tumultuous year for banks. Banking failures on both sides of the Atlantic Ocean have renewed focus on asset and liability management (ALM), bringing an often-overlooked ...
Jul 12, 2019 · In particular, beginning in 2015, large banks in the United States have needed to comply with the liquidity coverage ratio (LCR) by holding sufficient "high-quality liquid assets" (HQLA), a requirement that has induced significant changes to banks' balance sheet management. In this article, we examine how U.S. banks have managed the composition ...
Feb 4, 2024 · A rise in the market interest rate causes a decline in the value of the assets that the financial institution intends to sell to raise liquid funds. Thus, these assets are sold at a loss. The losses incurred reduce earnings and lead to fewer liquid funds raised from the sale of the assets. Furthermore, raising liquid funds by borrowing costs more.
Oct 1, 2024 · The more stringent liquidity requirements of Option B may offer some resolution benefits, such as allowing more time to carry out a smoother resolution of a troubled institution. But this would likely come at the expense of more costly financial intermediation, due to the need for deposit-taking institutions to carry more liquid assets.
Liquidity is a measure of the money and other assets a bank has readily available to quickly pay bills and meet financial obligations in the short term. Capital is a measure of the resources available to a bank to absorb losses. Many people mistakenly think that capital is held in reserve like an asset, or kept aside by banks to use for ...
Jul 11, 2024 · The researchers study how a liquidity shock to one bank impacted the liquidity positions of other banks before and during the COVID-19 pandemic. They find that this shock transmission, or “spillover,” was stronger during the COVID-19 period than the pre-pandemic period, on average. They also find that, on average, connections that can ...
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Diversity within the stock of liquid assets – capacity to liquidate or repo particular assets can vary depending on the scenario for reasons outside of the institution's control. Concentration in the stock of liquid assets should result in lower liquidity values. This is even more of an issue if the assets need to be liquidated in a narrow ...
