Bank Liquidity, the Maturity Ladder, and Regulation

57 Pages Posted: 6 Aug 2012

See all articles by Leo de Haan

Leo de Haan

De Nederlandsche Bank

Jan Willem van den End

De Nederlandsche Bank

Date Written: July 12, 2012

Abstract

We investigate 62 Dutch banks’ liquidity behaviour between January 2004 and March 2010, when these banks were subject to a liquidity regulation that is very similar to Basel III’s Liquidity Coverage Ratio (LCR). We find that most banks hold more liquid assets against their stock of liquid liabilities, such as demand deposits, than strictly required under the regulation. More solvent banks hold fewer liquid assets against their stock of liquid liabilities, suggesting an interaction between capital and liquidity buffers. However, this interaction turns out to be weaker during a crisis. Although not required, some banks consider cash flows scheduled beyond one month ahead when setting liquidity asset holdings, but they seldom look further ahead than one year.

Keywords: Banks, Liquidity, Regulation

JEL Classification: G21, G28, G32

Suggested Citation

de Haan, Leo and van den End, Jan Willem, Bank Liquidity, the Maturity Ladder, and Regulation (July 12, 2012). De Nederlandsche Bank Working Paper No. 346. Available at SSRN: https://ssrn.com/abstract=2125081 or http://dx.doi.org/10.2139/ssrn.2125081

Leo de Haan (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31 20 5243539 (Phone)
+31 20 5242514 (Fax)

Jan Willem van den End

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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