What are some other ways that different banks could have different liquidity positions despite having similar liquidity ratios?
• Cash flow from principal and interest payments could vary due to the types of loans on the balance sheet • One bank may have existing relationships and procedures for loan sales • One bank may have a large loan maturing • One bank may be involved in securitizing credits for the bond markets • One bank may have borrowing lines collateralized by the loan portfolio All of these answers could dramatically impact liquidity/cash flow. And while the use of borrowings secured by the loan portfolio is typically regarded as a volatile source of funding, the Federal Financial Institutions Examination Council has stated that their usage would not necessarily be criticized, so long as the borrowing is reasonable and well managed. While these borrowings are not as cheap as most core deposits, they are not as expensive as brokered deposits and the lenders are typically very flexible with the terms – meaning management can match their characteristics with the loan portfolio the borrowings are suppor
