Large Bank Examination Workshop February 2026

Funding Sources - Risks

• Repo  Reduce matched book; especially in less liquid collateral; risk of client relationship damage  Widening haircuts  Depreciation of collateral market price  Funding providers request collateral upgrades or shorter terms; usually both • Borrowings  Commercial paper – client resistance due to anticipation of ratings downgrade  Structured notes – clients execute calls or resist new funding • Debt  Unsecured debt – Client resistance to new debt or demand widening spreads; clients request buybacks/exercise puts

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Potential Off-balance Sheet Funding Strategies • Securitization – long lead time between gathering assets to underwriting then delivery • Contingent lines to the firm – not reliable sources of liquidity in stress situation • Contingent lines granted to clients as backup lines of credit – anticipate will be drawn in a stress situation

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© Global Financial Markets Institute Inc.

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