Liquidity Provision and Co-Insurance in Bank Syndicates

59 Pages Posted: 18 Nov 2021 Last revised: 16 Sep 2022

See all articles by Kevin F. Kiernan

Kevin F. Kiernan

Independent

Vladimir Yankov

Board of Governors of the Federal Reserve System

Filip Zikes

Board of Governors of the Federal Reserve System

Date Written: September 24, 2021

Abstract

We develop a simple model of the liquidity and insurance capacity of the interbank network arising from loan syndication. We find that the liquidity capacity has increased significantly following the introduction of liquidity regulation, and that the liquidity co-insurance is economically important for the corporate sector. We also find that borrowers with higher reliance on credit lines have become more likely to obtain credit lines from syndicates with higher liquidity capacities. The increase in liquidity capacities and the assortative matching on liquidity characteristics has strengthened the importance of large banks as liquidity providers to the corporate sector.

Keywords: G21, G18, L14

JEL Classification: Liquidity Insurance, Liquidity Regulation, Interbank networks, Syndicated Credit Lines

Suggested Citation

Kiernan, Kevin F. and Yankov, Vladimir and Zikes, Filip, Liquidity Provision and Co-Insurance in Bank Syndicates (September 24, 2021). Available at SSRN: https://ssrn.com/abstract=3930232 or http://dx.doi.org/10.2139/ssrn.3930232

Kevin F. Kiernan

Independent ( email )

Vladimir Yankov (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Filip Zikes

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
26
Abstract Views
227
PlumX Metrics