Wholesale funding

Rationale

Although core deposits continue to be a key liability funding source, many insured depository institutions have experienced difficulty attracting core deposits and are increasingly looking to wholesale funding sources to satisfy funding and liability management needs.

Liquidity risk

Wholesale funding providers are generally sensitive to changes in the credit risk profile of the institutions to which they provide these funds and to the interest rate environment. For instance, such providers closely track the institution's financial condition and may be likely to curtail such funding if other investment opportunities offer more attractive interest rates. As a result, an institution may experience liquidity problems due to lack of wholesale funding availability when needed. Academic research suggests that the use of wholesale funding was one of the major determinants of bank vulnerability during the

See also