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When liquidity risk becomes a systemic issue: Empirical evidence of bank behaviour

Jan Willem End () and Mostafa Tabbae

Journal of Financial Stability, 2012, vol. 8, issue 2, 107-120

Abstract: This article provides empirical evidence of behavioural responses by banks in the recent crisis. Using firm-specific balance sheet data, we construct aggregate indicators of systemic risk. Measures of size and herding show that balance sheet adjustments have been pro-cyclical in the crisis, while responses became increasingly dependent across banks and concentrated on certain market segments. Banks reacted less according to a pecking order, as an indication of reduced flexibility in their risk management opportunities. The behavioural indicators are useful tools for monetary and macro prudential analyses and can contribute to the micro foundations of financial stability models.

Keywords: Banking; Financial stability; Stress-tests; Liquidity risk (search for similar items in EconPapers)
JEL-codes: C15 E44 G21 G32 (search for similar items in EconPapers)
Date: 2012
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Working Paper: When liquidity risk becomes a macro-prudential issue: Empirical evidence of bank behaviour (2009) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:8:y:2012:i:2:p:107-120

DOI: 10.1016/j.jfs.2011.05.003

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