How do Global Banks Scramble for Liquidity? Evidence from the Asset-Backed Commercial Paper Freeze of 2007
Viral Acharya,
Anna Kovner and
Gara Afonso
No 9457, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
In August of 2007, banks faced a freeze in funding liquidity from the asset-backed commercial paper (ABCP) market. We investigate how banks scrambled for liquidity in response to this freeze and its implications for the real economy. Commercial banks in the United States raised deposits and took advances from Federal Home Loan Banks (FHLBs). In contrast, foreign banks ? with limited access to the deposit market and FHLB advances ? lent less in the overnight interbank market and borrowed more from the Federal Reserve?s Term Auction Facility (TAF) auctions. Relative to before the ABCP freeze and relative to their non US dollar lending, foreign banks with ABCP exposure charged higher interest rates on syndicated loan packages denominated in dollars. The results point to a funding risk in global banking, manifesting as currency shortages for banks engaged in maturity transformation in foreign countries.
Keywords: Credit crunch; Abcp freeze; Liquidity (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-ban and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)
Downloads: (external link)
https://cepr.org/publications/DP9457 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Journal Article: How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007 (2017) 
Working Paper: How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007 (2013) 
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:cpr:ceprdp:9457
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP9457
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().