Published by The Financial Times on 5 December 1997
Study history for a Lesson on Liquidity
SIR - In "Poll paralysis grips Seoul" (November 27)you report that the International Monetary Fund criticised Korean banks for relying on short-term foreign loans leaving the nation vulnerable to a liquidity crisis. So true.
Continental Illinois and so many other cases have shown that contrary to the text-book view, liquidity management is not about holding gilts or T-bonds but about diversifying liabilities.
Rather than get fixated over macho exotic options, bankers the world over should study history.
related article: Liberalisation of Korean Financial Markets
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