Post-crisis financial regulatory reform has taken some steps to address the financial stability risks associated with a dealer's use of short-term SFT funding to finance inventory. For example, the liquidity coverage ratio requires firms to hold a buffer of high-quality liquid assets when they use SFT liabilities that mature in less than 30 days to fund many types of securities.
New risk-based capital rules have substantially increased the amount of capital that dealers are required to hold against assets in the trading book. But these reforms are limited: The LCR does not require firms to hold any liquidity buffer against SFT liabilities that mature in more than 30 days or that are backed by very liquid assets.