A question of funding
The recent turmoil in the financial markets has highlighted the importance of liquidity risk management. For structured product providers, it could mean the end of cheap overnight funding for long-term assets and the erosion of profit margins. By Duncan Wood
On March 12, five months before the liquidity crisis hit fever pitch and a swath of the fixed-income markets virtually shut down, the Institute for International Finance (IIF) issued a report that advised the banking industry to sharpen up its liquidity management practices. Buried in its appendices was a section drafted by experts from Barclays, Commerzbank, Credit Suisse, Deutsche Bank, HSBC and Merrill Lynch, which outlined a series of common shortcomings in structured product funding
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