Bank Rollover Risk and Liquidity Supply Regimes

Eric Jondeau, Benoit Mojon and Jean-Guillaume Sahuc
Additional contact information
Eric Jondeau: Swiss Finance Institute and HEC Lausanne

International Journal of Central Banking, 2024, vol. 20, issue 3, 373-454

Abstract: The maturity mismatch between their short-term financing and long-term lending exposes banks to the risk of rolling over their funding. Such a rollover risk is sufficient on its own to cause a panic at the bank level and have ripple effects on the banking system as a whole. We propose a new indicator that helps central banks monitor rollover risk and thus design liquidity support operations when needed. Building on forward rates, our rollover risk indicator (RRI) captures the way banks price the risk of not being able to obtain funding at the horizon of specific interest rate derivatives. We show that our RRI has a better predictive power for economic growth and bank lending than usual bank credit spreads. In addition, our indicator helps to contrast three liquidity regimes (crisis, moderate, and abundant), which coincide with the levels of excess liquidity supplied by central banks.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ijcb.org/journal/ijcb24q3a8.pdf (application/pdf)

Related works:
Working Paper: Bank Rollover Risk and Liquidity Supply Regimes (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2024:q:3:a:8

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().