Do we need a stable funding ratio? Banks’ funding in the global financial crisis

Antoine Lallour and Hitoshi Mio
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Hitoshi Mio: Bank of Japan

No 602, Bank of England working papers from Bank of England

Abstract: We use data from the recent global financial crisis to study the importance of several structural funding metrics in characterising banks’ resilience. We find that structural funding ratios, including the Basel Committee’s Net Stable Funding Ratio (NSFR) which will soon become a new requirement, would have helped detect, back in 2006, which banks were to subsequently fail, even controlling for the banks’ solvency ratios. Their predictive power seems to come from the liability side and in particular from the fact that they count retail deposits as a highly stable funding source. Indeed, a deposits-to-assets ratio would outperform the other structural metrics we investigated as failure predictors for this crisis. Our findings suggest that this crisis was a crisis of banks’ funding structures.

Keywords: Banking; bank regulation; deposits; funding (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-05-20
New Economics Papers: this item is included in nep-ban and nep-cba
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0602

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