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Banks can package them into investment products, or pledge them as collateral for an interbank loan.
Interbank loan rates continued to fall, in some cases to the levels they were at in mid-September.
Regulators raised the interest rate on a key interbank loan last week, signaling further increases intended to rein in spending.
Regulators raised the interest rate on an important interbank loan last week, signaling further rate increases designed to rein in spending.
Last week, the central bank edged up the rate on an often-watched interbank loan, the first such hike in five months.
Such transactions were sometimes used to remove assets from banks' balance-sheets, helping them to meet rules on loan-deposit ratios and capital.Under old rules banks did not have to attribute much capital to an interbank loan.
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The industry does not track comprehensive totals for interbank loans.
Guaranteeing interbank loans taken at Libor (the London interbank offered rate) should be sufficient to bring down interbank lending rates.
"Interbank loans were funded by money that originated from the drugs trade and other illegal activities," he said.
The Federal Deposit Insurance Corporation strengthened its emergency guarantee program on bank deposits, interbank loans and certain senior unsecured debt that banks issue.
The Libor for three-month loans is usually close to the federal funds rate, the target set by the Federal Reserve for overnight interbank loans.
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