Global balance-sheet growth behind dollar scarcity
The dollar funding difficulties which arose during the turmoil were directly linked to the remarkable expansion in banks' global balance sheets, new research from the Bank for International Settlements (BIS) reveals.
The research finds that the growth in European and Japanese banks' dollar assets since 2000 produced structural dollar funding requirements, setting the stage for the dollar shortage when interbank and swap markets became impaired. The analysis also shows that stresses can build up
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