Commonality under pressure: banks and funds

Matteo Aquilina, Giulio Cornelli and Nikola Tarashev

BIS Quarterly Review, 2025

Abstract: We study the joint evolution of financial strain at banks and investment funds. When market pressure on banks intensifies from an elevated level, net flows decline at open-ended corporate bond mutual funds (MFs), corporate bond exchange-traded funds (ETFs) and prime money market funds alike. This commonality has risen materially over time for all three fund types. That said, bond ETFs can be a stabilising force, as salient features of their business model help attract investor inflows in times of stress. By contrast, outflows from bond MFs tend to contribute to a tightening of market conditions when banks are already under pressure.

JEL-codes: G21 G22 G23 (search for similar items in EconPapers)
Date: 2025
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