How excessive is banks’ maturity transformation?

Anatoli Segura and Javier Suarez

No 1065, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We quantify the gains from regulating banks’ maturity transformation in an infinite horizon model of banks which finance long-term assets with non-tradable debt. Banks choose the amount and maturity of their debt trading off investors’ preference for short maturities with the risk of systemic crises. As in Stein (2012), pecuniary externalities make unregulated debt maturities inefficiently short. The assessment is based on the calibration of the model to Eurozone banking data for 2006. Lengthening the average maturity of wholesale debt from its 2.8 months to 3.3 months would produce welfare gains with a present value of euro 105 billion.

Keywords: liquidity risk; maturity regulation; pecuniary externalities; systemic crises (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-ban and nep-pke
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: How Excessive Is Banks’ Maturity Transformation? (2017)
Working Paper: How Excessive is Banks’ Maturity Transformation? (2016)
Working Paper: How Excessive Is Banks' Maturity Transformation? (2016)
Working Paper: How excessive is banks’ maturity transformation? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1065_16

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