Bank Liquidity Hoarding and the Financial Crisis: An Empirical Evaluation

I test and find supporting evidence for the precautionary motive hypothesis of liquidity hoarding U.S. commercial banks during global financial crisis. that held more liquid assets in anticipation future losses from securities write-downs. Exposure to their investment portfolios expected loan (measured by loss reserves) represent key measures banks’ on-balance sheet risks, addition off-balance risk stemming unused commitments. Furthermore, unrealized reserves seem better capture risks asset management provide nature hoarding. Moreover, than one-fourth reduction bank lending crisis is due motive.