The case for liquidity regulation One of the primary economic functions of banks and other financial intermediaries, such as broker-dealers, is to provide liquidity – that is, cash on demand – in various forms to their customers. Some of this liquidity provision happens on the liability side of the balance sheet, with bank demand deposits being a leading example.
The international liquidity position, which was positively affected by the prepayment by the Bank of the $ billion syndicated loan that was raised in 2004, increased from $ billion to $ billion over the same period. The prepayment resulted in some cost savings for the Bank, and conveyed a positive signal to counterparties of the Bank and the market.