Basel III F: Callable Commercial Paper

Andrew Metrick

Journal of Financial Crises, 2019, vol. 1, issue 4, 101-110

Abstract: One of the Basel Committee on Banking Supervision's responses to the global financial crisis of 2007-09 was to introduce the Liquidity Coverage Ratio (LCR), a short-term measure that evaluates whether a bank has enough liquidity to meet expected cash outflows during a 30-day stress scenario. One area in which this incentive has already resulted in changed practices is in the market for commercial paper. Banks often provide backup liquidity facilities to the issuers of commercial paper that the issuers can draw upon to repay a maturing issue of commercial paper if they are unable to sell a new issue to do so. To avoid such draws occurring within the 30-day LCR window, banks have developed commercial paper that features a call provision enabling issuers to redeem the commercial paper prior to the start of the window. This case considers the implications of the emergence of callable commercial paper and whether this development introduces additional risk into the financial system.

Keywords: Liquidity Coverage Ratio; Basel III; BIS; BCBS; Global Financial Crisis; Callable Commercial Paper; Securities Law (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://elischolar.library.yale.edu/cgi/viewconten ... -of-financial-crises (application/pdf)

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:ysm:ypfsfc:1488

Access Statistics for this article

More articles in Journal of Financial Crises from Yale Program on Financial Stability (YPFS) Contact information at EDIRC.
Bibliographic data for series maintained by ().