But it, too, has a principally microprudential focus, since it rests on the implicit premise that maturity-matched books at individual firms present relatively low risks. While maturity mismatch by core intermediaries is a key financial stability risk in wholesale funding markets, it is not the only one.
Even if an intermediary’s book of securities’ financing transactions is perfectly matched, a reduction in the intermediary’s access to funding can force the firm to engage in asset fire sales or to abruptly withdraw credit from customers. The intermediary’s customers are likely to be highly leveraged and maturity-transforming financial firms as well, and, therefore, may then have to engage in fire sales themselves.