Bank regulation, supervision and liquidity creation

Liquidity provision and optimal bank regulation

We extend the set of regulatory instruments for banks’ liquidity provision by adding a policy instrument for controlling the fraction of perfectly-liquid accounts. We demonstrate how this instrument induces self-selection on behalf of depositors who are differentiated according to their probability of facing a liquidity shock. This selfselection leads to a market segmentation, which can break t...

Bank Liquidity and Bank Performance: Looking for a Nonlinear Nexus

Liquid assets are critical for banking operations. They guarantee avoiding liquidity risk and widens managerial decision options to invest in emerging profitable projects; however, holding extra liquidity entails opportunity costs. Accordingly, empirical literature does not provide a conclusive relationship between liquidity and profitability. The purpose of this research is to analyze the asym...

Bank mergers, competition and liquidity

We provide a model of the impact of bank mergers on loan competition, individual reserve management and aggregate liquidity risk. Banks hold reserves against liquidity shocks, refinance in the interbank market and compete in a differentiated loan market. A merger creates an internal money market that induces financial cost advantages and may increase reserve holdings. We assess the liquidity ri...

Corporate Governance and Liquidity Creation: Evidence from Iranian Banks

This paper examines the impact of internal bank governance on bank liquidity creation in Iran during 2010-2017. We analyze whether banks with larger size and liquidity levels creates higher levels of liquidity. The results using panel GMM method show that corporate governance has a positive effect on liquidity creation; of course, it is not significant. Also, this effect is not affecting by ban...

Dynamic Shock Bank Liquidity Analysis