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They allow banks, for example, to match their assets and liabilities much more closely.
By doing so, they can better match their assets (the loans) within a specific country with their liabilities (the deposits).
As Americans age, and actuaries and accountants want pension funds to match their assets and liabilities more closely, long-dated bonds from an unimpeachable issuer look just the ticket.
What banks can do for small-scale businesses, particularly merchants who routinely work with their suppliers on credit, is less loans for investment or trade finance than overdraft facilities to match their assets and liabilities.
This is especially true of life companies, which need to match their assets to long-term liabilities.Having developed the expertise to manage their own portfolios, some insurers (such as France's AXA and Britain's Aviva) have established asset-management arms to handle investments for clients.
British companies, he adds, have not reduced prices to pursue sales growth with the devaluation of sterling, but have sought (like Diageo) to hold prices and boost margins.In Spain, Mr Thanassoulis notes, foreign companies are furiously scrambling to match their assets and liabilities so as not to be caught short; they keep just enough cash in the country, and repatriate any spare.
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Regulators are pushing fund managers to safeguard pensioners' entitlements by matching their assets more closely to their liabilities.
Another advantage of 100%-reserve banking: Banks would need very little equity capital to cover the small risks associated with matching their assets and deposits.
Another important advantage of 100%-reserve banking: Banks would need very little equity capital to cover the small risks associated with matching their assets and deposits.
There is a shortage of long-term government bonds with which pension funds try to match their long-term assets and liabilities, resulting in a sharp rise in bond prices and an embarrassing fall in the yields on which the viability of pension funds depends.
"By and large pension funds still have a long way to go to make sure assets match their liabilities," he said.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com