Internal Liquidity’s Value in a Financial Crisis

Cecilia R. Caglio and Adam Copeland
Additional contact information
Cecilia R. Caglio: https://www.federalreserve.gov/econres/cecilia-r-caglio.htm

No 20240408, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: A classic question for U.S. financial firms is whether to organize themselves as entities that are affiliated with a bank-holding company (BHC). This affiliation brings benefits, such as access to liquidity from other affiliated entities, as well as costs, particularly a larger regulatory burden. This post highlights the results from a recent Staff Report that sheds light on this tradeoff. This work uses confidential data on the population of broker-dealers to study the benefits of being affiliated with a BHC, with a focus on the global financial crisis (GFC). The analysis reveals that affiliation with a BHC makes broker-dealers more resilient to the aggregate liquidity shocks that prevailed during the GFC. This results in these broker-dealers being more willing to hold riskier securities on their balance sheet relative to broker-dealers that are not affiliated with a BHC.

Keywords: broker-dealers; shadow banking; liquidity risk; repo market (search for similar items in EconPapers)
JEL-codes: G2 G21 G23 (search for similar items in EconPapers)
Date: 2024-04-08
New Economics Papers: this item is included in nep-ban and nep-cfn
References: Add references at CitEc
Citations:

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2024 ... -a-financial-crisis/ Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:98032

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().