Chairman Ben S. Bernanke At the 48th Annual Conference on Bank Structure and Competition, Chicago, Illinois. May 10, 2012
Banks and Bank Lending: The State of Play: “The banking sector overall also has substantially improved its liquidity position over the past few years. Indeed, large banks in the aggregate have more than doubled their holdings of cash and securities since 2009. Large banks have reduced their collective dependence on short-term wholesale funding, and many are flush with retail deposits, which tend to be a more stable funding source. Challenges on the liquidity front remain, however: Some large firms still rely heavily on wholesale short-term funding; and the liquidity needs of the banking system as a whole may become somewhat higher for a while as some of the securities issued under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program come due, and as the unlimited insurance on noninterest-bearing transaction accounts expires at the end of the year. Nevertheless, over time, greater liquid asset positions and reduced dependence on wholesale short-term funding, together with more and better capital, will make the banking sector less susceptible to unexpected disruptions in short-term funding markets.”
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