<Definition> Liability-side liquidity refers to the property of being able to raise needed funds, when needed, within a reasonable amount of time and at reasonable cost, through liabilities and funding sources.
On the asset side, funds are raised by selling or pledging held assets. On the liability side, funds are raised through liabilities and funding sources such as borrowing, deposits, bond issuance, and repo. The two can thus be paired across the balance sheet: the asset side as the ability to convert held assets into cash, and the liability side as the ability to raise funds through liabilities and funding sources. "Liquidity" here does not mean that the liability itself is "liquid"; it refers to how easily needed funds can be raised by using that liability or funding source. BIS research treats funding liquidity in relation to meeting payment obligations through funding, and distinguishes it from market liquidity, which involves raising funds by selling assets. [1]