Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions

A-Tier
Journal: The Review of Financial Studies
Year: 2009
Volume: 22
Issue: 3
Pages: 995-1020

Authors (3)

Evan Gatev (not in RePEc) Til Schuermann Philip E. Strahan (not in RePEc)

Score contribution per author:

1.341 = (α=2.01 / 3 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but only for banks with low levels of transactions deposits. This deposit-lending hedge becomes more powerful during periods of tight liquidity, when nervous investors move funds into their banks. Our results reverse the standard notion of liquidity risk at banks, where runs from depositors had been seen as the cause of trouble. The Author 2007. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: [email protected], Oxford University Press.

Technical Details

RePEc Handle
repec:oup:rfinst:v:22:y:2009:i:3:p:995-1020
Journal Field
Finance
Author Count
3
Added to Database
2026-01-29