Liquidity and transparency in bank risk management
Lev Ratnovski ()
Journal of Financial Intermediation, 2013, vol. 22, issue 3, 422-439
Banks may be unable to refinance short-term liabilities in case of solvency concerns. To manage this risk, banks can accumulate a buffer of liquid assets, or strengthen transparency to communicate solvency. While a liquidity buffer provides complete insurance against small shocks, transparency covers also large shocks but imperfectly. Due to leverage, an unregulated bank may choose insufficient liquidity buffers and transparency. The regulatory response is constrained: while liquidity buffers can be imposed, transparency is not verifiable. Moreover, liquidity requirements can compromise banks’ transparency choices, and increase refinancing risk. To be effective, liquidity requirements should be complemented by measures that increase bank incentives to adopt transparency.
Keywords: Banks; Liquidity risk; Regulation; Transparency; Basel III (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Liquidity and Transparency in Bank Risk Management (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:22:y:2013:i:3:p:422-439
Access Statistics for this article
Journal of Financial Intermediation is currently edited by Elu von Thadden
More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().