external liquidity risk

external liquidity risk
A term defined by the Federal Reserve. The risk that a bank will experience funding problems as a result of factors outside of its direct control. The Federal Reserve defines three types of external liquidity risk. These are geographic (such as the premiums required on deposits at many Texas banks in the late 1980s), systemic (such as the adverse effects upon several large banks caused by the near failure of Continental Illinois Bank in 1984), or instrument-specific (such as the collapse of the perpetual floating-rate note market in 1986.) See bank-specific liquidity risk and systemic liquidity risk. American Banker Glossary

Financial and business terms. 2012.

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