Indeed, the current turmoil has brought to the fore the enhanced interaction between market liquidity and funding liquidity of individual institutions, partly reflecting the trend among large global banks towards greater reliance on wholesale market sources for funding as opposed to retail deposits.
In addition, the experience of some financial institutions in recent months has shown that protracted illiquidity may weaken the balance sheets of institutions and in extreme cases put their solvency at risk. Against this background, central bank interventions have aimed to address funding liquidity shortages by supporting market liquidity. In doing so, they have contributed to preventing insolvencies.