Here is a quite wonderful post by Tracy Alloway at FT Alphaville about the Federal Home Loan Banks and the Liquidity Coverage Ratio. The issue, as it always is, is that:
everyone wants banks to be safe, but
everyone wants banks to do banking stuff.
The particular flavor of “safe” here is: Look, the big systemic risk of banks is runs on the bank. The way (a way) to reduce the risk of runs is for banks to just have a bunch of cash lying around. That way, if everyone comes into the bank yelling for their money back, you can just give them their money back.
via Banks Turn Cash Into Mortgages and Back Into Cash – Bloomberg View.
