Uncertainty and Bank Wholesale Funding

40 Pages Posted: 21 Jun 2016

See all articles by Valeriya Dinger

Valeriya Dinger

Universität Osnabrück

Ben R. Craig

Federal Reserve Bank of Cleveland; Deutsche Bundesbank

Date Written: 2013


In this paper we relate a bank's choice between retail and wholesale liabilities to real economic uncertainty and the resulting volatility of bank loan volumes. We argue that since the volume of retail deposits is slow and costly to adjust to shocks in the volume of bank assets, banks facing more intense uncertainty and more volatile loan demand tend to employ more wholesale liabilities rather than retail deposits. We empirically confirm this argument using a unique dataset constructed from the weekly reports of the 122 largest U.S. commercial banks. The high frequency of the data allows us to employ dynamic identification schemes. Given the evidence presented in this paper we argue that regulatory measures targeting a cap on wholesale funding would limit funding uncertainty but will increase the exposure to asset-side shocks.

Keywords: wholesale funding, retail deposits, bank uncertainty, loan volume volatility

JEL Classification: G21, E44

Suggested Citation

Dinger, Valeriya and Craig, Ben R., Uncertainty and Bank Wholesale Funding (2013). Bundesbank Discussion Paper No. 39/2013, Available at SSRN: https://ssrn.com/abstract=2796929 or http://dx.doi.org/10.2139/ssrn.2796929

Valeriya Dinger (Contact Author)

Universität Osnabrück ( email )

Neuer Graben
Osnabrück, 49074

Ben R. Craig

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101
United States
216-579-2061 (Phone)
216-579-3050 (Fax)

Deutsche Bundesbank

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431

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