Liquidity Shock Management: Lessons from Australian Banks

Posted: 2 Jun 2020

See all articles by Christine A. Brown

Christine A. Brown

Department of Banking and Finance; Financial Research Network (FIRN)

Viet Minh Do

Monash University - Department of Accounting; Financial Research Network (FIRN)

Oscar Trevarthen

affiliation not provided to SSRN

Date Written: November 17, 2016

Abstract

Prior to the 2007–2009 financial crisis, international banks had an average share of around 65% of the syndicated loan market in Australia. When the crisis hit, the resulting liquidity shock resulted in globally active international banks exiting the Australian market. With limited global operations, the major Australian banks were able to absorb and manage the liquidity shock. This resulted in domestic banks carrying a significantly greater proportion of revolving credit facilities in their syndicated loan portfolios after 2008. Domestic bank willingness and ability to deal with the market disruption and to hold a greater proportion of high liquidity risk revolvers are directly linked to the level of their transaction deposits. Their increased involvement in revolving facilities cannot be fully explained by the certification effect or flight-to-home effect. It is not demand driven and is robust to endogeneity tests.

Keywords: Australian domestic banks, competitive advantage, liquidity risk, syndicated loans

Suggested Citation

Brown, Christine A. and Do, Viet Minh and Trevarthen, Oscar, Liquidity Shock Management: Lessons from Australian Banks (November 17, 2016). Australian Journal of Management, Vol. 42, No. 4, 2016, Available at SSRN: https://ssrn.com/abstract=3592446

Christine A. Brown (Contact Author)

Department of Banking and Finance ( email )

Building 11E
Clayton, Victoria 3800
Australia
+61 3 99031793 (Phone)
+61 3 99055475 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: www.firn.org.au

Viet Minh Do

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Oscar Trevarthen

affiliation not provided to SSRN

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