The paper models the interaction between risk taking in the financial sector and central bank policy for the case of pure illiquidity risk. It is shown that, when bad states are highly unlikely, public provision of liquidity may improve the allocation, even though it encourages more risk taking...

Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing, 2008), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback between lender of last resort policy and incentives of...

The paper aim to examine the impact of foreign ownership and national governance quality on liquidity risk in Vietnam's listed commercial banks from 2010 to 2021, covering the COVID-19 outbreak. Using the two-step generalized method of moments regression model (GMM), the findings indicate that...

Better customer service provisions by banks - such as more branches and ATMs, longer business hours, and more personalized services - help attract more core deposits and increase funding stickiness by raising depositors' switching costs and enhancing their loyalty. Funding stickiness from...

Our study presents the top-down stress testing framework currently used by the Magyar Nemzeti Bank. We run separate solvency and liquidity stress tests to analyse the ability of the banking system to absorb shocks and we present their results in our Report on Financial Stability. In the former,...

We identify the impact of short-term interest rates on credit risk-taking in the short and long run by analyzing a comprehensive credit register from Spain, a country where for the last twenty years monetary policy was mostly decided abroad. Duration analyses show that lower overnight rates...

This study examines the relationship between financing structure and bank liquidity risk. We compare the findings between Islamic and conventional banks for the case of Malaysia. We adopt four measures to represent financing structure; namely 1) real estate financing, 2) financing concentration,...

This study provides findings on the transmission of liquidity shocks by Austrian parent banks through the lending channel. I investigate how different types of parent banks adjust their balance sheet positions in response to a liquidity shock and how such an adjustment is transmitted into...

This study sheds light on risk exposures of cooperative banks in Austria, Germany and Italy. We investigate how major risk elements of banks in these countries have evolved over time, across countries and institutions. Cooperative banks’ exposure to risk is analyzed looking at aggregate risk...

Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing, 2007), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback between lender of last resort policy and incentives of...