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Bank Funding, Liquidity, and Capital Adequacy: A Law and Finance Approach

This is a draft first chapter from a book that has been accepted for publication by Edward Elgar Publishing as a monograph due to be published in 2016

Florida International University Legal Studies Research Paper No. 16-05

24 Pages Posted: 4 Mar 2016  

José Gabilondo

Florida International University (FIU) - College of Law

Date Written: March 2, 2016

Abstract

Though seen primarily as lenders, depository banks face their own financing challenges arising from their role as intermediaries, their compliance with prudential regulation, the short-term stresses on their financial resources, and their changing position in a credit market populated with nonbank competitors. At the same time, these banks enjoy unique support from the central bank and government authorities, which stand by with stabilizing liquidity to supplement market funds. Drawing primarily on the banking system in the United States, this book offers an innovative framework that integrates a depository bank’s liquidity and its capital adequacy into a unified notion of funding, one that reveals how the 2007-2008 crisis unfolded, why central banks succeeded in resolving the crisis, and how the conceptual legacy of the crisis and its resolution led to lasting changes in bank funding regulation, including new objective requirements about a bank’s liquidity. To provide a comparative context, the book also examines the funding models of nonbank intermediaries like dealer banks and insurers.

Keywords: bank funding, liquidity coverage ratio, Basel III, regulatory capital, banking regulation, Dodd Frank

Suggested Citation

Gabilondo, José, Bank Funding, Liquidity, and Capital Adequacy: A Law and Finance Approach (March 2, 2016). This is a draft first chapter from a book that has been accepted for publication by Edward Elgar Publishing as a monograph due to be published in 2016; Florida International University Legal Studies Research Paper No. 16-05. Available at SSRN: https://ssrn.com/abstract=2741298 or http://dx.doi.org/10.2139/ssrn.2741298

Jose M. Gabilondo (Contact Author)

Florida International University (FIU) - College of Law ( email )

11200 SW 8th St.
RDB Hall 1097
Miami, FL 33199
United States

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