Rights statement: This is the author’s version of a work that was accepted for publication in Journal of International Money and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Money and Finance, 73, Part A, 2017 DOI: 10.1016/j.jimonfin.2017.02.001
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - System stress testing of bank liquidity risk
AU - Pagratis, Spyros
AU - Topaloglou, Nikolas
AU - Tsionas, Mike
N1 - This is the author’s version of a work that was accepted for publication in Journal of International Money and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Money and Finance, 73, Part A, 2017 DOI: 10.1016/j.jimonfin.2017.02.001
PY - 2017/5
Y1 - 2017/5
N2 - Abstract Using a stress test methodology for bank liquidity risk we estimate the aggregate liquidity shortfall in the U.S. commercial banking system at the height of 2007–09 crisis, identifying key sources of funding vulnerabilities and the dominant composition of liquid asset holdings against liquidity shocks. The largest liquidity shocks to the system are estimated in the first half of the crisis, in line with Acharya and Mora (2015). Large banks experience the largest liquidity shortfall in 2008:Q1 ($154 billion or 14% of total assets) and small banks in 2007:Q4 ($117 billion or 11% of total assets). The dominant funding vulnerability to the system stems from large time deposits, while government securities largely dominate other classes of liquid assets as liquidity backstop. The analysis draws on detailed bank-level data on balance sheet flows of funds and applies stochastic dominance efficiency methods to capture liquidity risk diversification effects across assets and liabilities.
AB - Abstract Using a stress test methodology for bank liquidity risk we estimate the aggregate liquidity shortfall in the U.S. commercial banking system at the height of 2007–09 crisis, identifying key sources of funding vulnerabilities and the dominant composition of liquid asset holdings against liquidity shocks. The largest liquidity shocks to the system are estimated in the first half of the crisis, in line with Acharya and Mora (2015). Large banks experience the largest liquidity shortfall in 2008:Q1 ($154 billion or 14% of total assets) and small banks in 2007:Q4 ($117 billion or 11% of total assets). The dominant funding vulnerability to the system stems from large time deposits, while government securities largely dominate other classes of liquid assets as liquidity backstop. The analysis draws on detailed bank-level data on balance sheet flows of funds and applies stochastic dominance efficiency methods to capture liquidity risk diversification effects across assets and liabilities.
KW - Banks
KW - Liquidity risk
KW - Stochastic dominance efficiency
U2 - 10.1016/j.jimonfin.2017.02.001
DO - 10.1016/j.jimonfin.2017.02.001
M3 - Journal article
VL - 73
SP - 22
EP - 40
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
SN - 0261-5606
IS - Part A
ER -