A Simple Macroprudential Liquidity Buffer

Daniel Hardy and Philipp Hochreiter

No 2014/235, IMF Working Papers from International Monetary Fund

Abstract: A mechanism is proposed that aims to reduce the risk of a banking sector liquidity crisis—which is a quintessentially systemic event and thus the object of macroprudential policy—and moderate the effects of a crisis should one occur. The instrument would give banks more incentive to build up buffers of systemically liquid assets as a proportion of their total liabilities, yet these buffers would be usable in times of stress. The modalities of the instrument are considered with a view to making it effective, efficient, and robust.

Keywords: WP; bank; LMC; MPLB requirement; Macroprudential instruments; liquidity; bank funding; systemic risk; liquidity shock; liquidity characteristic; liquidity spiral; liquidity ring fencing; liquidity condition; liquidity outflow; liquidity property; liquidity strain; through-the-cycle MPLB level; MPLB balance; liquidity mis-match; Liquidity requirements; Liquidity risk; Reserve requirements; Global (search for similar items in EconPapers)
Pages: 24
Date: 2014-12-22
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Citations: View citations in EconPapers (4)

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