The impact of liquidity regulation on bank intermediation
Bonner,Clemens Eijffinger,Sylvester C. W.
Bonner,Clemens
Eijffinger,Sylvester C. W.
Abstract
We analyze the impact of a requirement similar to the Basel III Liquidity Coverage Ratio on the bank intermediation applying Regression Discontinuity Designs. Using a unique dataset on Dutch banks, we show that a liquidity requirement causes long-term borrowing and lending rates as well as demand for long-term interbank loans to increase. Lower levels of aggregate liquidity increase the estimated effects. Short-term borrowing and lending rates only rise during periods of lower market-wide liquidity. Further, banks do not seem able to pass on the increased funding costs in the interbank market to their private sector clients. Rather, a liquidity requirement seems to decrease banks' interest margins.
Description
Date
2016-08
Journal Title
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Volume Title
Publisher
Research Projects
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Keywords
G18 - Government Policy and Regulation, G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages, E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems, SDG 10 - Reduced Inequalities
Citation
Bonner, C & Eijffinger, S C W 2016, 'The impact of liquidity regulation on bank intermediation', Review of Finance, vol. 20, no. 5, pp. 1945-1979. https://doi.org/10.1093/rof/rfv058
License
info:eu-repo/semantics/closedAccess