Liquidity risk and credit in the financial crisis

Philip E. Strahan

FRBSF Economic Letter, 2012, issue may14

Abstract: The 2007?08 financial crisis was the biggest shock to the banking system since the 1930s, raising fundamental questions about liquidity risk. The global financial system experienced urgent demands for cash from various sources, including counterparties, short-term creditors, and, especially, existing borrowers. Credit fell, with banks hit hardest by liquidity pressures cutting back most sharply. Central bank emergency lending programs probably mitigated the decline. Ongoing efforts to regulate bank liquidity may strengthen the financial system and make credit less vulnerable to liquidity shocks.

Keywords: Credit; Liquidity (Economics); Financial crises - United States (search for similar items in EconPapers)
Date: 2012
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