Maturity transformation: Difference between revisions
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imported>Doug Williamson (Add links.) |
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* [[Liquidity preference]] | * [[Liquidity preference]] | ||
* [[Maturity]] | * [[Maturity]] | ||
* [[Maturity mismatch]] | |||
* [[Prudential Regulation Authority]] | * [[Prudential Regulation Authority]] | ||
* [[Riding the yield curve]] | * [[Riding the yield curve]] | ||
* [[Run]] | * [[Run]] | ||
* [[Shadow banking]] | * [[Shadow banking]] | ||
Revision as of 19:40, 10 August 2016
Borrowers and depositors generally have differing preferences about the maturity of their obligations and investments.
Borrowers normally prefer to borrow longer-term, for example to fund long-term investment in productive assets.
Investors generally prefer shorter-term, more liquid assets.
Maturity transformation is the essential economic function of banks and other intermediaries, which enables both borrowers and investors to meet their differing needs for maturities.
For this to work, there needs to be a very high degree of market confidence in the bank, especially on the part of its depositors.
