Liquidity RiskOctober 25, 2017
Many banks across the Tenth District are facing the pressures of continued loan growth without corresponding increases in stable funding sources. Recent trends indicate institutions have been funding loan growth through a reduction in liquid assets and increases in non-traditional funding sources, such as brokered deposits, listing service funds, and secured debt. Supervisory expectations around liquidity risk remain consistent; that is, institutions should maintain a sufficient cushion of unencumbered liquid assets, appropriately diverse funding sources, and comprehensive contingency funding plans that address potential adverse liquidity events. Each of these expectations is addressed in the Federal Reserve's Supervision and Regulation (SR) Letter 10-6, "Interagency Policy Statement on Funding and Liquidity Risk Management."