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Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions / Evan Gatev, Til Schuermann, Philip E. Strahan.
- Format:
- Book
- Author/Creator:
- Gatev, Evan.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w12234.
- NBER working paper series no. w12234
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Managing Bank Liquidity Risk
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2006.
- Summary:
- Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the increase is smaller for banks with high levels of transactions deposits. This deposit-lending risk management synergy becomes more powerful during periods of tight liquidity, when nervous investors move funds into their banks. Our results reverse the standard notion of liquidity risk at banks, where runs from depositors had been seen as the cause of trouble.
- Notes:
- Print version record
- May 2006.
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