The impact of liquidity regulation on banks

By R. Banerjee, Hitoshi Mio. Journal of Financial Intermediation, 2017

172 citations recorded by the source corpus.

We present the first study to estimate the causal effect of liquidity regulation on bank balance sheets. It takes advantage of the heterogeneous implementation of tighter liquidity regulation by the UK Financial Services Authority in 2010. We find that banks adjusted the composition of both assets and liabilities, increasing the share of high-quality liquid assets and non-financial deposits while reducing intra-financial loans and short-term wholesale funding. We do not find evidence that the tightening of liquidity regulation caused banks to shrink their balance sheets, nor reduce the amount of lending to the non-financial sector.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/232755836c587a03c5e657dfbf98c4cdacd8cbfe

Citations in the corpus

• Macroprudential policy and bank systemic risk (2020, unknown): “As outlined in Bisias et al. (2012) over 30 competing systemic risk measures have been developed over the past years ranging from network analysis to macroeconomic and illiquidity indicators.”