Bank funding and liquidity management: new report from the Committee on the Global Financial System

27 May 2010

The Committee on the Global Financial System (CGFS) today released a report on Funding patterns and liquidity management of internationally active banks. The report was prepared by a study group that was established by the CGFS and chaired by Mário Mesquita, former Deputy Governor of the Central Bank of Brazil.

The report investigates changes in funding practices and liquidity management of international banks in response to the crisis. The report makes the following observations:

  • The diversity in existing business models, with a mix of decentralised and centralised institutions, is the result of many factors and likely to be a source of systemic resilience.
  • After the global financial crisis, liquidity management appears to be more centralised than was the case before. At the same time, international banks seem inclined to marginally and gradually increase local funding of local assets.
  • Regulatory developments are likely to lead to further changes in funding and liquidity management, especially if host regulators implement local requirements that go beyond those laid down by international standards.
  • A proliferation of host country regulation could imply that global banking groups would have to decentralise important aspects of their funding and liquidity management, hold more liquid assets in more locations, and reduce their reliance on intragroup funding.
  • Further decentralisation would make banks and financial systems more resilient to certain kinds of shocks, but would also entail additional costs.

CGFS Chairman Donald L Kohn said that this report would help to inform the debate on international banking and regulation.

Specific questions regarding the report may be sent to the Secretariat of the CGFS by e-mail (CGFS@bis.org) or fax (+41 61 280 9100).