Brexit offers banks an opportunity to restructure their balance sheets and improve funding profile

Just when we thought we were firmly on a path to another Fed tightening in June or July, the world got a sharp reminder Thursday night that it is full of volatility and things don’t always go as planned.  This dramatic and historic Brexit event offers banks an opportunity to delever their balance sheet  by getting rid of high coupon term funding liabilities (e.g. Term FHLB Advances) and possibly re-lever at significantly lower coupons, thereby improving their funding profile.

 

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