Despite the credit crunch and its market fallout, the liquidity of the largest U.S. securities firms remains strong, says Fitch Ratings in a new report.

Fitch observes that investors’ appetite for U.S. sub-prime issuances and any related issuance has spread to a lack of appetite for a multitude of largely structured products. “Execution of rolling short-term funds in structured vehicles and by mortgage originators has become difficult with concerns of liquidity turning to financial institutions,” it adds. “Not surprisingly, the liquidity of the U.S. securities firms and potential balance sheet impact of asset re-pricing is also a concern.”

With those concerns in mind, it published a report today discussing the liquidity and status of the five largest U.S. securities firms — Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley.

It finds that the five firms are well capitalized. “Firms have access to high levels of unencumbered securities. Sufficient asset liquidity is present to support short term funding needs,” it says. “Current pricing dislocations could negatively impact asset values if they continue for the next several weeks however, the firms have sufficient capacity to absorb potential mark to market losses in the near term.”

“Leverage may increase as loan commitments are funded,” it adds. “Sufficient long term funding sources are available including senior and subordinated issues, deposits and access to pre-funded conduits. Fitch will monitor the length of time these exposures are retained versus prior expectations of swift distribution.”

Fitch says that it will evaluate the allocation of capital to businesses in light of the recent injections of money into their own managed funds and current unprecedented credit dislocations. “However, this stress will be placed in context with the industry’s resilience and demonstrated capacity to absorb shocks over the last few years including the crises in the falls of 1997 and 1998, the 2000 equity market correction and the events surrounding September 11, 2001,” it concludes.