A Law and Finance Approach
Chapter 7: Concluding observations
The book concludes with five major conclusions about bank funding. First, bank funding should be seen as an organic notion that internalizes the funding liquidity and loss-absorption consequences of the bank’s role as an intermediary. Second, within this notion short-term funding liquidity – its money position – deserves special, focused attention because it is the bank’s financial threshold for survival. Third, funding regulation – be it of banks or nonbank intermediaries – should be seen as a unified field with inter-related elements that address funding liquidity and loss-absorption in complementary and, to a certain extent, substitutable ways. Fourth, since the crisis lawmakers are more likely to look beyond an enterprise’s regulatory shell to determine whether the enterprise presents financial risks that justify funding regulation. Finally, these developments elevate the status of the bank’s treasury operations, a back office function that has become a hive of compliance initiatives and profit-seeking strategies. As banks contend with growing funding requirements, treasury operations will be at the heart of the business model.
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