Regulators look to curb banks' dependence on short-term borrowing

09/28/2009 | Financial Times (tiered subscription model)

Regulators are trying to develop rules that would keep banks from becoming overly dependent on short-term loans, a situation that contributed to the collapse of Lehman Brothers and Bear Stearns. The discussion revolves around the idea that increased capital cushions are not enough to prevent a run on a bank that is relying on overnight markets for short-term funding. "Capital is critical, but liquidity enhancement is a necessary piece of the puzzle," said Kevin Bailey of the Office of the Comptroller of the Currency.

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