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Drought hits community banks’ deposit farm

April 5, 2018

How times have changed!

Back in 2010, the horse was already out of the barn with respect to liquidity risk. As such, the expansion of liquidity management expectations set in “Interagency Statement on Funding and Liquidity Risk Management” was a little late in terms of making a difference. In 2009 140 banks failed, followed by 157 in 2010, and 92 in 2011.

For those without credit-induced capital issues, by then the prevailing liquidity challenge seemed to be a surplus of cash and few options to deploy it. This occurred because many banks had pulled in their horns on lending risk. Because of this liquid bond and cash holdings spiked.

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