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Bank liquidity, the maturity ladder, and regulation

Leo de Haan () and Jan Willem End ()

Journal of Banking & Finance, 2013, vol. 37, issue 10, 3930-3950

Abstract: We investigate the liquidity management of 62 Dutch banks between January 2004 and March 2010, when these banks were subject to a liquidity regulation that is very similar to Basel III’s Liquidity Coverage Ratio (LCR). We find that most banks hold more liquid assets against their stock of liquid liabilities, such as demand deposits, than strictly required under the regulation. More solvent banks hold fewer liquid assets against their stock of liquid liabilities, suggesting an interaction between capital and liquidity buffers. However, this interaction turns out to be weaker during a crisis. Although not required, some banks consider cash flows scheduled beyond 1month ahead when setting liquidity asset holdings, but they seldom look further ahead than 1year.

Keywords: Banks; Liquidity; Regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Bank liquidity, the maturity ladder, and regulation (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:10:p:3930-3950

DOI: 10.1016/j.jbankfin.2013.07.008

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