Understanding Dry Powder: A Clear Look at Liquidity Readiness
last updated on Friday, April 17, 2026 in Strategies
Scott Goedken, Institutional Strategies Director
Brandon Casey, Member Strategist
Scott Hofer, Member Strategies Manager
Managing liquidity in today’s environment can be complex, particularly when market conditions change quickly and access to funding matters as much as balance sheet strength. One critical, and often misunderstood, aspect of liquidity preparedness is “dry powder,” especially as it relates to FHLB Des Moines borrowing capacity and pledged collateral.
For FHLB Des Moines members, dry powder is not theoretical liquidity or unpledged asset eligibility. Rather, it represents immediately accessible borrowing capacity supported by pledged and verified collateral. Institutions that clearly define and maintain this readiness are better positioned to respond to deposit volatility, market disruption or unexpected liquidity needs.
This approach highlights how proactive collateral management translates balance sheet strength into reliable funding optionality. By maintaining pledged collateral in advance, institutions gain clearer visibility into true borrowing capacity, reduce operational risk during stress events and strengthen the effectiveness of their contingency funding plans.
Our Member Strategies team has developed a new white paper focused on this topic.
DOWNLOAD THIS WHITE PAPER
Inside the paper, you’ll find:
- A clear and practical definition of dry powder in the FHLB context, centered on operationally available borrowing capacity.
- An explanation of how dry powder functions as a core liquidity management tool and supports balance sheet stability.
- Insight into the risks of waiting to pledge collateral and the tangible benefits of establishing your collateral pledge.
Contact your relationship manager or the Member Strategies team to discuss the concepts further or explore how they apply to your balance sheet.
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