Banks, Maturity Mismatches and Liquidity Crises: A Simple Model

Abstract

In determining the maturity structure of bank loans in the presence of pre-determined, short-term international liabilities, we show that maturity mismatches in banks' balance sheets are fully consistent with the assumption of banks acting as self-interested, optimising agents. Although often attributed to the moral hazard associated with safety nets, the analysis shows that financial crises can occur in their absence.

Keywords: banks, currency crisis, East Asia, maturity mismatches, moral hazard

JEL Classification: F34, F39, G21