Therefore, it would be desirable to have regulations that would provide incentives to alleviate this maturity mismatch, thereby preventing crisis. One possible solution would be to link the maturity mismatch between assets and liabilities with the capital requirement. For example, a bank raising funds from longer-term deposits would have a lower capital requirement than one raising funds in the overnight money market.
This scheme would give banks an incentive to take longer maturities on the liabilities side in particular. Putting aside the question of whether it is desirable to link maturity mismatches with capital requirements, it is clear that the continuous monitoring for appropriate liquidity at financial institutions is an effective tool for detect the early-warning signs of financial crisis.