Banks fearing the drought? Liquidity hoarding as a response to idiosyncratic interbank funding dry-ups

Arbeitspapier

We investigate whether idiosyncratic interbank funding shocks affecting a bank headquarters can trigger a liquidity hoarding reaction by their regional branches. Shock-affected branches of Brazilian banks increase liquid assets and cut lending in the shocks' aftermath compared to non-affected branches within the same municipality, even in absence of a market-wide freeze. These effects increase in branches' reliance on internal funding and vary depending on banks' access to central bank emergency liquidity. Our findings suggest that the geographical fragmentation of branches' funding limits their ability to offset idiosyncratic funding shocks.

Object Details

• ISBN: 978-3-95729-824-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 16/2021

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Portfolio Choice; Investment Decisions ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: Interbank funding ; Internal capital markets ; Financial market structure ; Liquidity risk ; Central bank interventions

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Littke, Helge ; Ossandon Busch, Matias
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/234196
• Last update: 10.03.2025, 11:44 AM CET