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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Liquidity and Funding

The FDIC has consolidated a number of resources relating to Liquidity and Funding. 

This webpage will allow users to:

Liquidity and Funding

Liquidity is a financial institution’s capacity to meet its cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flows and collateral needs without adversely affecting either daily operations or the financial condition of the institution.

Liquidity risk measurement and management systems should reflect an institution’s complexity, risk profile, and scope of operations. Pro forma cash flow analysis is an important component of an institution’s liquidity risk management program.  Institutions that use wholesale funding, securitizations, brokered deposits and other high-rate funding strategies should ensure that their contingency funding plans address relevant stress events.

Liquidity Metrics for Large Internationally Active Banks

In the aftermath of the 2007-2009 financial crises, international standard setters sought out new tools and standards to mitigate overall liquidity risk with the goal of providing for a more stable financial system.  Two key tools that were developed and seek to bolster liquidity in the financial system are the Liquidity Coverage Ratio (LCR), which focuses on short-term liquidity risk from severe market stresses, and the Net Stable Funding Ratio (NSFR), which seeks to promote stable funding structures over a one-year horizon.  

The federal banking agencies finalized the U.S. LCR rule in September 2014, and it will apply to large banking organizations.  The LCR does not apply to community banking and savings institutions.

The NSFR was published by the Basel Committee on Banking Supervision on October 31, 2014.  On April 26, 2016, the FDIC and the OCC issued a notice of proposed rulemaking to implement the NSFR and the Federal Reserve Board issued the NSFR NPR on May 3, 2016. Similar to the LCR, the proposed NSFR standard would not apply to community banking and savings institutions.

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