Regulators Take Steps to Aid Bank Liquidity

Wall Street Journal (07/16/08) P. A2; Paletta, Damian
U.S. and foreign financial regulators soon will institute new risk management policies to ensure banks continue to have access to short-term cash so that they can handle large withdrawals and keep lending to businesses and other borrowers. The Federal Deposit Insurance Corp.'s board recently approved a measure that calls for the creation of a "covered bond" market in an effort to stimulate the mortgage market. Board member and Comptroller of the Currency John Dugan underscores the need for "additional liquidity tools." However, regulators are cautious when it comes to brokered deposits, whose customers are more likely to withdraw funds without warning.