Banking System Stability with respect to Funding Liquidity Risk

Mario Haefeli
Additional contact information
Mario Haefeli: University of Zurich and Swiss Finance Institute

No 10-37, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We construct unique measures which allow to discuss the financial stability of banking systems with respect to funding liquidity risk. We quantify the maximal proportional price shock a banking system can sustain without downward spiralling illiquid asset prices. It follows that an absolute and a percentage increase of liquid assets improve and severer capital requirements in times of financial distress reduce banking system stability. The model is calibrated to the Austrian banking system. The empirical analysis shows financial instability already in 2006, i.e., the stability measure proves to have a long-term forecast power in this case.

Keywords: Banking; Financial Stability; Funding Liquidity Risk; Liquidity Risk; Regulation; Systemic Risk (search for similar items in EconPapers)
JEL-codes: C62 G21 G28 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-07
References: Add references at CitEc
Citations:

Downloads: (external link)
http://ssrn.com/abstract=1669941 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 410 Gone (http://ssrn.com/abstract=1669941 [301 Moved Permanently]--> https://ssrn.com/abstract=1669941 [301 Moved Permanently]--> https://www.ssrn.com/abstract=1669941 [302 Moved Temporarily]--> https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1669941)

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:chf:rpseri:rp1037

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().