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Is there a role for funding in explaining recent US bank failures?

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  • Pierluigi Bologna

    ()
    (Banca d'Italia)

Abstract

This paper tests the role of different banks’ liquidity funding structures in explaining the bank failures that occurred in the United States between 2007 and 2009. The results highlight that funding is indeed a significant factor in explaining banks’ probability of default. By confirming the role of funding as a driver of banking crisis, the paper also recognizes that the new liquidity framework proposed by the Basel Committee on Banking Supervision appears to have the features needed to strengthen banks’ liquidity conditions and improve financial stability. Its correct implementation, together with closer supervision of banks’ liquidity and funding conditions, appear decisive, however, if such improvements are to be achieved.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 103.

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Date of creation: Oct 2011
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Handle: RePEc:bdi:opques:qef_103_11

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Keywords: banks; default; crises; liquidity; funding; brokered deposits; liquidity regulation; deposit insurance; United States;

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Citations

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Cited by:
  1. Ignacio Hernando & Jimena Llopis & Javier Vallés, 2012. "Los retos para la política económica en un entorno de tasas de interés próxima a cero," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 121-151, julio-sep.
  2. Adrian Van Rixtel & Gabriele Gasperini, 2013. "Financial crises and bank funding: recent experience in the euro area," BIS Working Papers 406, Bank for International Settlements.
  3. Fumiko Hayashi & William R. Keeton, 2012. "Medición de los costos de los métodos de pago minoristas," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 152-180, julio-sep.
  4. Tatom, John, 2011. "Predicting failure in the commercial banking industry," MPRA Paper 34608, University Library of Munich, Germany.
  5. Jihad Dagher & Kazim Kazimov, 2012. "Banks' Liability Structure and Mortgage Lending During the Financial Crisis," IMF Working Papers 12/155, International Monetary Fund.
  6. Pablo Federico & Francisco F. Vázquez, 2012. "Bank Funding Structures and Risk," IMF Working Papers 12/29, International Monetary Fund.
  7. McQuinn, Kieran & Woods, Maria, 2012. "Modelling the corporate deposits of Irish financial institutions: 2009 - 2010," Research Technical Papers 02/RT/12, Central Bank of Ireland.
  8. Sònia Muñoz & Samir Jahjah & Martin Cihák & Sharika Teh Sharifuddin & Kalin Tintchev, 2012. "Financial Stability Reports:What Are they Good for?," IMF Working Papers 12/1, International Monetary Fund.
  9. Martin Cihák & Sonia Muñoz & Shakira Ten Sharifuddin & Kalin Tintchev, 2012. "Informes de estabilidad financieras: ¿cuál es su utilidad?," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 181-230, julio-sep.

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