Miranda Love (January 26)
BTRM Faculty Opinion
When Liquidity Fails, Behaviour Comes First
Liquidity rarely disappears quietly. It vanishes in moments of uncertainty, when confidence falters and decision-makers are forced to act with incomplete information and little time. In those moments, balance sheets matter, but behaviour matters more. Think about it…
We have seen this play out in real time. When concerns about Silicon Valley Bank began to circulate, it wasn’t a press release or a ratings downgrade that triggered the run, it was conversations. Messages shared in group/WhatsApp chats, allegedly. Founders advising each other to move cash. Screenshots of balances being pulled.
Within hours, what might once have been a slow-burn confidence issue became a full-scale liquidity event. The assets had not suddenly changed, but behaviour had.
Yet modern liquidity management is still often treated as a problem of calibration. If buffers are sufficient, scenarios severe enough, and governance robust, resilience should follow. In practice, liquidity events rarely unfold according to models. They are shaped by perception, narrative, and timing and by how markets, depositors, and leadership teams interpret and respond to uncertainty in the moment.
Treasury frameworks are designed to absorb shocks, preserve optionality, and buy time. These are the same principles that underpin elective financial coaching, understood not as a retail intervention but as a leadership and decision-making discipline. At its core, coaching focuses on how people think, communicate, and act when facing uncertainty, trade-offs, and constraint.
These dynamics are not unique to individuals. They sit at the heart of institutional liquidity management. Treasury teams build buffers, escalation frameworks, and stress tests to create space for decision-making. Yet when stress arrives, outcomes depend less on structure and more on how leaders interpret information, communicate under pressure, and decide when or whether to act.
Liquidity buffers are often discussed in terms of coverage ratios and survival horizons. These questions matter, but they are incomplete. Buffers do more than fund outflows; they change behaviour. Adequate liquidity creates time to assess information, communicate clearly, and avoid reactive decisions. Thin buffers compress time, accelerate escalation, and erode optionality.
This is well understood in financial coaching. Individuals with buffers make different decisions under stress, less panic-driven, less defensive, more deliberate. Liquidity preserves agency: the capacity to choose rather than react. At an institutional level, the same principle applies. Liquidity resilience is not only about meeting regulatory thresholds, but about protecting decision quality when conditions deteriorate.
Regulators and markets increasingly converge on the call for larger buffers, particularly in response to speed-driven stress. From a supervisory perspective, this is rational. But markets remain inconsistent. In calm conditions, excess liquidity is framed as inefficiency; in stress, it becomes a marker of strength. Buffers are judged not in isolation, but through confidence and narrative.
