be achieved in a decentralized banking system. What is required is that the central bank accommodates the demands of the … the sharing of idiosyncratic liquidity risk. In contrast, idiosyncratic (bank-specific) return risks cannot be shared …

We use a unique data set that comprises each bank’s bids in the Eurosystem’s main refinancing operations and its … that a bank’s willingness-to-pay is a good indicator for the probability that this bank draws on the LOLR facility. Our …