Morgan Stanley 2010 Annual Report Download - page 92

Global Liquidity Reserve by Type of Investment
The table below summarizes the Company’s Global Liquidity Reserve by type of investment:
At December 31,
2010
(dollars in billions)
Cash and cash equivalents ....................................................... $ 42
Securities purchased under agreements to resell/Securities borrowed ..................... 88
Federal Reserve-eligible securities ................................................ 41
Global Liquidity Reserve ................................................... $171
The vast majority of the assets held in the Global Liquidity Reserve can be monetized on a next-day basis in a
stressed environment given the highly liquid and diversified nature of the reserves. The remainder of the assets
can be monetized within two to five business days.
The currency composition of the Global Liquidity Reserve is consistent with the CFP on a currency level. The
Company’s funding requirements and target liquidity reserves may vary based on changes to the level and
composition of its balance sheet, subsidiary funding needs, timing of specific transactions, client financing
activity, market conditions and seasonal factors.
Global Liquidity Reserve Held by the Parent and Subsidiaries
The table below summarizes the Global Liquidity Reserve held by the Parent and subsidiaries:
At
December 31,
2010
At
December 31,
2009
Average Balance(1)
2010 2009
(dollars in billions)
Parent .............................................. $ 68 $ 64 $ 65 $ 61
Non-bank subsidiaries ................................. 35 40 31 35
Bank subsidiaries ..................................... 68 59 63 58
Total ........................................... $171 $163 $159 $154
(1) The Company calculates the average global liquidity reserve based upon weekly amounts.
The Company is exposed to intra-day settlement risk in connection with liquidity provided to its major broker-
dealer subsidiaries for intra-day clearing and settlement of its securities and financing activity.
Funding Management Policies.
The Company’s funding management policies are designed to provide for financings that are executed in a
manner that reduces the risk of disruption to the Company’s operations. The Company pursues a strategy of
diversification of secured and unsecured funding sources (by product, by investor and by region) and attempts to
ensure that the tenor of the Company’s liabilities equals or exceeds the expected holding period of the assets
being financed. Maturities of financings are designed to manage exposure to refinancing risk in any one period.
The Company funds its balance sheet on a global basis through diverse sources. These sources may include the
Company’s equity capital, long-term debt, repurchase agreements, securities lending, deposits, commercial
paper, letters of credit and lines of credit. The Company has active financing programs for both standard and
structured products targeting global investors and currencies such as the U.S. dollar, euro, British pound,
Australian dollar and Japanese yen.
Secured Financing. A substantial portion of the Company’s total assets consists of liquid marketable securities
and short-term collateralized receivables arising principally from its Institutional Securities sales and trading
activities. The liquid nature of these assets provides the Company with flexibility in financing these assets with
collateralized borrowings.
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