Les mystères de la liquidité. Plaidoyer pour la « bonne » transformation bancaire

How does the financial system ensure a stable funding of physical investments, while meeting the liquidity requirement of financial investors, who generally want to be able to get back their funds if needed ? This article examines the role of different market participants in what looks like mysterious efforts to square the circle. The secondary securities markets, collective investment funds and banks provide complementary or in competition with each other these liquidity services. For the latter, we distinguish the « right » from the « bad » banking transformation. The first is what banks realize when they keep loans on their balance sheets and issue in exchange some long securities (stocks, bonds) quite easily marketable in secondary markets. From hard to negotiate loans to households and companies, banks are able to « manufacture » medium-term securities of varying risks (equities, senior or subordinated bonds, covered bonds) and with a much improved liquidity. But banks do not usually stop at this first stage of transformation : they also carry out securitisations and more importantly proceed to maturity transformation, i.e. short-term financing of long-term loans. We insist here on the negative cost-benefit ratio of this last « layer » of transformation : it encourages the « short-termism » of investors, makes banks vulnerable to « runs » and nourishes systemic risk. We also emphasize the responsibility of the authorities in the severe dysfunctions observed in the liquidity market. The tax system and the loopholes observed in the regulation of investment funds penalize the « right? banking transformation and encourage the disintermediation process (i.e. collective investment funds and secondary markets at the expense of banks). These harmful distortions should be corrected. In parallel, the generous lenders of last resort subsidize and encourage the transformation of maturity by protecting banks against the risk of « run ». They are thus sowing the seeds of the next crisis. Yet, other better ways to manage liquidity crisis seem possible.