Do Non-Banks Need Access to the Lender of Last Resort? Evidence from Fund Runs

60 Pages Posted: 11 May 2021 Last revised: 6 Mar 2023

See all articles by Johannes Breckenfelder

Johannes Breckenfelder

European Central Bank (ECB) - Financial Research

Marie Hoerova

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2023

Abstract

Are central bank tools effective in reaching non-banks with no access to the lender-of-last-resort facilities? Using runs on mutual funds in March 2020 as a laboratory, we show that, following the announcement of large-scale purchases, funds with higher ex ante shares of assets eligible for central bank purchases saw their performance improve by 3.6 percentage points and outflows decrease by 61% relative to otherwise similar funds. Following central bank liquidity provision to banks, the growth rate of repo lending to funds by banks more exposed to the system-wide liquidity crisis was up to five times higher compared to other banks.

Keywords: Investment funds, lender of last resort, market maker of last resort, asset purchases, COVID-19 liquidity crisis

JEL Classification: E58, G01, G10, G21, G23

Suggested Citation

Breckenfelder, Johannes and Hoerova, Marie, Do Non-Banks Need Access to the Lender of Last Resort? Evidence from Fund Runs (March 1, 2023). Available at SSRN: https://ssrn.com/abstract=3843356 or http://dx.doi.org/10.2139/ssrn.3843356

Johannes Breckenfelder

European Central Bank (ECB) - Financial Research ( email )

Sonnemannstrasse 20
D-60314 Frankfurt am Main
Germany

HOME PAGE: http://johannesbreckenfelder.eu/

Marie Hoerova (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

HOME PAGE: http://www.mariehoerova.net

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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