We develop a microeconomic banking framework to analyze how liquiditymanagement decisions influence the availability of liquidity to depositors, the viabilityof the asset transformation process and the solvency of banking firms. In particular,we focus on how the optimal allocation of deposits...

The paper analyzes the effects of financial competition on the management of banking risks when monopolistically competitive intermediaries exist in the deposit market. Banking decisions refer to deposits and reserves. These decisions are constrained by liquidity and solvency risks. These risks...