Banks ‘over reliant on wholesale funding’

TOO many banks were over reliant on wholesale funding when the credit crunch blew up last August, causing a massive liquidity crisis in the global banking sector.

“The question is how wise is it to have a funding strategy that is 100% based on wholesale funding,” said Mario Draghi, governor of the Bank of Italy, who addressed the banking community in Dublin yesterday.

Responding to a question after he delivered the Central Bank Whitaker lecture in Dublin Castle, Mr Draghi said banks that relied solely on the inter-bank markets for their funding were the ones who suffered most.