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Bank liquidity, the maturity ladder, and regulation

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  • Leo de Haan
  • Jan Willem van den End

Abstract

We investigate 62 Dutch banks' liquidity behaviour between January 2004 and March 2010, when these banks were subject to a liquidity regulation that is very similar to Basel III's Liquidity Coverage Ratio (LCR). We find that most banks hold more liquid assets against their stock of liquid liabilities, such as demand deposits, than strictly required under the regulation. More solvent banks hold fewer liquid assets against their stock of liquid liabilities, suggesting an interaction between capital and liquidity buffers. However, this interaction turns out to be weaker during a crisis. Although not required, some banks consider cash flows scheduled beyond one month ahead when setting liquidity asset holdings, but they seldom look further ahead than one year.

Suggested Citation

  • Leo de Haan & Jan Willem van den End, 2012. "Bank liquidity, the maturity ladder, and regulation," DNB Working Papers 346, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:346
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    Cited by:

    1. Neyer, Ulrike & Sterzel, André, 2018. "Preferential treatment of government bonds in liquidity regulation: Implications for bank behaviour and financial stability," DICE Discussion Papers 301, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Clemens Bonner, 2016. "Preferential Regulatory Treatment and Banks' Demand for Government Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1195-1221, September.
    3. Clemens Bonner & Sylvester Eijffinger, 2012. "The Impact of the LCR on the Interbank Money Market," DNB Working Papers 364, Netherlands Central Bank, Research Department.
    4. repec:dgr:kubcen:2012075 is not listed on IDEAS
    5. repec:eee:ecmode:v:67:y:2017:i:c:p:193-202 is not listed on IDEAS
    6. Clemens Bonner & Sylvester C. W. Eijffinger, 2016. "The Impact of Liquidity Regulation on Bank Intermediation," Review of Finance, European Finance Association, vol. 20(5), pages 1945-1979.
    7. Ryan N. Banerjee & Hitoshi Mio, 2014. "The Impact of Liquidity Regulation on Banks," BIS Working Papers 470, Bank for International Settlements.
    8. Voloshyn, Ihor & Voloshyn, Mykyta, 2013. "Risk-adjusted pricing of bank’s assets based on cash flow matching matrix," MPRA Paper 61611, University Library of Munich, Germany.
    9. repec:eee:finana:v:57:y:2018:i:c:p:77-89 is not listed on IDEAS
    10. Clemens Bonner & Iman Lelyveld & Robert Zymek, 2015. "Banks’ Liquidity Buffers and the Role of Liquidity Regulation," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(3), pages 215-234, December.
    11. repec:kap:fmktpm:v:31:y:2017:i:4:d:10.1007_s11408-017-0297-9 is not listed on IDEAS
    12. Pierluigi Bologna, 2017. "Banks’ maturity transformation: risk, reward, and policy," Temi di discussione (Economic working papers) 1159, Bank of Italy, Economic Research and International Relations Area.
    13. Hong, Han & Huang, Jing-Zhi & Wu, Deming, 2014. "The information content of Basel III liquidity risk measures," Journal of Financial Stability, Elsevier, vol. 15(C), pages 91-111.
    14. repec:bla:ecnote:v:46:y:2017:i:1:p:105-115 is not listed on IDEAS
    15. Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.
    16. Ágoston, Kolos Cs. & Benedek, Gábor & Gilányi, Zsolt, 2016. "Pareto improvement and joint cash management optimisation for banks and cash-in-transit firms," European Journal of Operational Research, Elsevier, vol. 254(3), pages 1074-1082.
    17. repec:eee:jbfina:v:87:y:2018:i:c:p:87-101 is not listed on IDEAS
    18. Adi Mordel, 2018. "Prudential Liquidity Regulation in Banking-A Literature Review," Discussion Papers 18-8, Bank of Canada.
    19. Arvind Krishnamurthy & Jennie Bai & Charles-Henri Weymuller, 2016. "Measuring Liquidity Mismatch in the Banking Sector," NBER Working Papers 22729, National Bureau of Economic Research, Inc.
    20. repec:tiu:tiucen:2012075 is not listed on IDEAS

    More about this item

    Keywords

    Banks; Liquidity; Regulation;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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