Sources of funding for banks

The most sensitive funding sources are from the interbank market, whether it be domestic or foreign. funding from the interbank market can be both volatile and expensive. Many problems arise in emerging markets due to the tendency of banks to over rely on interbank funding. For instance, 1994 crisis in Turkey expose many Turkish banks' over reliance on internbank credit lines and bank-syndicated borrowings from overseas. When the country's sovereign risk rating was downgraded, sentiment changed as the economic crisis took hold. International banks cut credit lines, squeezing many domestic banks liquidity positions...Turkish banks realized from the crisis the advantage of possessing a good base of domestic deposit funding as it is the most stable source of funds for banks.