Were Banks Exposed to Sell-offs by Open-End Funds during the Covid Crisis?

Nicola Cetorelli

No 20211018, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Should open-end mutual funds experience redemption pressures, they may be forced to sell assets, thus contributing to asset price dislocations that in turn could be felt by other entities holding similar assets. This fire-sale externality is a key rationale behind proposed and implemented regulatory actions. In this post, I quantify the spillover risks from fire sales, and present some preliminary results on the potential exposure of U.S. banking institutions to asset fire sales from open-end funds.

Keywords: open end funds; banks; liquidity; COVID-19; bank holding companies (BHCs) (search for similar items in EconPapers)
JEL-codes: G2 G21 (search for similar items in EconPapers)
Date: 2021-10-18
New Economics Papers: this item is included in nep-ban
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