Regulators to U.S. banks: tighten up on funding

WASHINGTON (Reuters) - The Federal Reserve and other banking regulators jointly reminded financial institutions on Wednesday about the importance of managing their liquidity to avoid a repeat of the financial crisis.

The 50-page policy statement said banks and other deposit-taking firms need to keep accurate projections of cash flows, do stress testing and maintain an adequate cushion of liquid assets to protect their safety and soundness.

Fed Governor Daniel Tarullo said the policy statement from the Fed, Conference of State Supervisors, Federal Deposit Insurance Corp., National Credit Union Administration, Office of the Comptroller of the Currency and Office of Thrift Supervision was prompted by recent history.

"The financial crisis revealed extensive weaknesses in liquidity and management at many financial institutions, especially those that relied excessively on short-term funding," he said.

Tarullo said the policy statement should be seen as "one step along the way to more sustainable funding practices, a more stable financial system, and a healthier economy."

(Reporting by Glenn Somerville, Editing by Chizu Nomiyama)