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How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007

Viral Acharya (), Gara Afonso () and Anna Kovner

No 623, Staff Reports from Federal Reserve Bank of New York

Abstract: We investigate how banks scrambled for liquidity following the asset-backed commercial paper (ABCP) market freeze of August 2007 and its implications for corporate borrowing. Commercial banks in the United States raised dollar deposits and took advances from Federal Home Loan Banks (FHLBs), while foreign banks had limited access to such alternative dollar funding. Relative to before the ABCP freeze and relative to their non-dollar lending, foreign banks with ABCP exposure charged higher interest rates to corporations for dollar-denominated syndicated loans. The results point to a funding risk manifesting as currency shortages for banks engaged in maturity transformation in foreign countries.

Keywords: funding risk and liquidity; global banking; ABCP freeze (search for similar items in EconPapers)
JEL-codes: G01 G38 G21 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2013-08-01, Revised 2016-04-01
New Economics Papers: this item is included in nep-ban and nep-ifn
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Journal Article: How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007 (2017) Downloads
Working Paper: How do Global Banks Scramble for Liquidity? Evidence from the Asset-Backed Commercial Paper Freeze of 2007 (2013) Downloads
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