Bank liquidity management during financial crises

Isabelle Distinguin (), Oussama Labchara () and Amine Tarazi ()
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Isabelle Distinguin: Université de Limoges, LAPE
Oussama Labchara: Bank Al-Maghrib
Amine Tarazi: Université de Limoges, LAPE; Institut Universitaire de France (IUF)

Economics Bulletin, 2025, vol. 45, issue 2, 1029 - 1042

Abstract: In this paper, we investigate the impact of financial crises on bank liquidity management, an issue which is crucial for financial stability. Using a sample of European publicly traded banks between 2004 and 2020, we find that financial crises shape banks' liquidity management. During the 2008 global financial crisis and the European sovereign debt crisis of 2010-2012, banks set lower liquidity targets and adjust to such targets faster than in non-crisis periods. Furthermore, different mechanisms are used to achieve these adjustments. During the 2008 global financial crisis, liquidity is improved via a reduction in lending and market debt and through equity repurchases. During the European sovereign debt crisis of 2010-2012, banks adjust their liquidity ratios upward by increasing deposits and reducing market debt. Our findings contribute to the literature on banks' liquidity management during financial crises and bear several policy implications.

Keywords: Bank liquidity management; financial crises; bank liquidity targets; adjustment speed (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2025-06-30
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