Mr Sarris cited the "lack of substantial liquidity and significant risk of deposits outflow, with possible outcome the collapse of the credit institutions" as the reasons for the restrictions.
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We are encouraging firms to improve their management of liquidity risk and to reduce over time their reliance on triparty repos for overnight financing of less-liquid forms of collateral.
By and large they certainly succeeded in bettering their positions but at the expense of adding liquidity risk to their supply chain.
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Globally some of the liquidity conditions that supported risk appetite, including central bank policies such as guarantees and quantitative easing, show no signs of being removed.
One of our concerns was that the infrastructures of those markets and the risk- and liquidity-management practices of market participants would not be adequate to deal in an orderly way with the collapse of a major counterparty.
Wholesale trading in Europe, which used to be mostly based on currency bets, is now a game of credit and liquidity risk, expressed in interest-rate spreads.
Finally, realize that even in the current low interest rate environment, short-term, low-yield bonds offer the advantage of liquidity and little downside risk, allowing them to potentially play an important role in your portfolio.
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Mr Swensen argues that diversification is a better form of risk control than liquidity.
He worried more than most about liquidity risk, the danger of cash-flows and funding drying up (which many financiers ignored at their peril in the last boom).
But electronic exchanges are relatively easy to monitor and the Internet minimises the risk of dispersing liquidity over a large number of markets an investor can scan them all quickly and cheaply.
The bigger the role that central banks have in offering liquidity support, the less commercial banks need to worry about their liquidity risk which is why tougher regulation of liquidity is required.
Some of these risks, according to Upendra Choudhary, senior vice president of credit services at Amba Research, include trading risk (some of these markets are thinly traded and have low liquidity), political risk and transparency risk (some areas have no or at least confusing accounting standards).
With no risk of inflation or liquidity-crisis-induced market crashes, partial privatization of Social Security might eventually become feasible.
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That sounds bad, but the banks that have lost access to direct ECB funding can almost certainly still get money from the Greek central bank, which, of course, is ultimately, getting its cash from the ECB (though unlike the more direct form of ECB liquidity support, all the risk implicit in this so-called ELA lending is, formally at least, borne by the Greeks alone).
Here, two related issues have emerged: the avoidance of risk and the need for liquidity.
For these reasons banks should be encouraged to consider more seriously the liquidity of their loans as well as their default risk.
Not a great 3%-plus recovery, because the Fed will have sucked up liquidity starting this summer to avoid the risk of more inflation.
Despite positive fundamentals, gold speculators sought liquidity and other safe havens as concerns of contagion risk spread to France and Italy, said TD Securities.
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Both survivors say they are nowhere near as exposed to the risk of a sudden dearth of liquidity as Bear Stearns was.
If the European banking crisis or the U.S. economy turn problematic again, then even torrents of central bank liquidity will not offset an increased risk profile for underlying investments.
As a broker-dealer, MF Global also added liquidity to the system, adding another layer of systemic risk: on Monday, MF Global traders were barred from the CME Trading floor, substantially limiting liquidity in futures markets.
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In general, effective government oversight of individual institutions increases financial resilience and reduces moral hazard by attempting to ensure that all financial firms with access to some sort of federal safety net--including those that creditors may believe are too big to fail--maintain adequate buffers of capital and liquidity and develop comprehensive approaches to risk and liquidity management.
Liquidity risk goes hand in hand with the whole move of OTC trades into exchanges.
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In particular, it may be difficult to determine whether principal risk has been retained because (i) the retention of such risk is necessary to provide intermediation and liquidity services for a relevant financial instrument or (ii) the position is part of a speculative trading strategy designed to realize profits from price movements in retained principal risk.
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The practices of even the best banks do not cope well with liquidity risk.
We think this indicates plentiful liquidity and an inflation risk, but also too high a probability of a premature Fed pause or cut.
As broker-dealers, regulated more lightly by the Securities and Exchange Commission, they were free to put large dollops of capital to work, providing liquidity, making markets and assuming risk.
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Corzine used the repo trade to finance purchases of billions of dollars of volatile European sovereign debt instead, thereby multiplying the liquidity and risk management needed to come out ahead.
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International bank regulators gave a second dangerous incentive to banks to lend to these countries, by classifying the debt as a close proxy for money for liquidity-management purposes (or to give protection against the risk of a bank run).
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