Banks are unique among financial institutions because they are the cheapest source of liquidity in the economy. Banks … liquidity. Since the cost of reserves falls on all issuers of less liquid liabilities seeking access to payment services …, including non-bank intermediaries, reserves cannot represent a tax on the banking system alone …

This paper examines the impact of exogenous liquidity shocks in the unsecured interbank market. We evaluate the effects … of idiosyncratic liquidity shocks - arising from deposits outflow at the bank level - and of the aggregate liquidity … shock related to the U.S. tapering observed between May and September of 2013. We find that both liquidity shocks are …

generated by the firm but borne by society. Recent advances in measuring liquidity creation (Berger and Bouwman, 2009) and … systemic risk (Acharya, et al. forthcoming) allow us to estimate our framework for U.S. commercial banking companies. We find … that CEO pay-performance incentives reduce both positive liquidity creation externalities and negative systemic risk …

We study how banks' capital level affects the extent to which they engage in liquidity transformation. We first …-ons. We find that banks engage in less liquidity transformation when their capital increases, which suggests that capital and … liquidity requirements are at least to some extent substitutes. We also find that this substitution is mostly driven by small …

as an indicator of the liquidity management adequacy in the banking system. I also suggest an extreme value theory … liquidity constraints that are currently ignored by RAROC and EVA models. While the economic profit accounts for the opportunity … cost of risky assets, what may even incorporate a market liquidity premium, it neglects the risk of failure due to the lack …