There are various reasons leading to an insufficient ability of the FI to rebalance its
shortages:
Ω Its rating could be downgraded. If sufficient collateral is available in time the FI
could switch from unsecured to secured borrowing.
Ω There may be rumours about its solvency. The ability to attract funds from other
liquid market participants is weakened. Liquid assets that can be sold or repoed
instantly could restore the confidence of the market.
Ω Even with undoubted standing it could be hard to raise cash: the limits other
institutions hold for the FI could be utilized.
Some of those reasons are hardly under the control of the FI. Others like the building
up of collateral and liquid asset holdings are at least controllable if handled ex ante.
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