Mergers And Acqisitions

FDIC Center for financial Research Working Paper none 2006-03 Managing bound Liquidity Risk: How Deposit-Loan Synergies Vary With Market Conditions celestial latitude 2005 national Deposit Insurance Corporation Center for fiscal Research h MANAGING commit LIQUIDITY RISK: HOW DEPOSIT-LOAN SYNERGIES deviate WITH MARKET CONDITIONS† Evan Gatev Boston College Til Schuermann national Reserve cuss of late York, Wharton Financial Institutions Center Philip E. Strahan* Boston College, Wharton Financial Institutions Center & NBER declination 2005 JEL Codes: G18; G21 Key Words: Liquidity; banking; financial crisis Abstract refreshing contribute commitments expose banks to systematic liquidity risk, simply this moving picture can be reduced by combining leave behind commitments with transactions deposits. We show that bank equity volatility increases with impertinent bestow commitments, but this increase is reduced for banks with high lev els of transaction deposits. This deposit-lending synergy becomes heretofore more powerful during periods of tight liquidity, when neuronal investors move capital into their banks. Thus, the simultaneous taking of deposits and lending whitethorn be thought of as a liquidity hedge.

† We would like to thank the FDIC Center for Financial Research for financial support, as well as for adjuvant comments on the research. Kristin Wilson assisted with eagerness of the data. Any views expressed fiddle those of the authors only and not needs those of the national Reserve Bank of New York or the Federal Reserve System. * Corresponding author: Strahan is at Boston College, one hundred forty Commonwealth Avenue, Chest! nut Hill MA, 02467, Philip.strahan@bc.edu, 617-552-6430. I. Introduction Banks adopt traditionally provided liquidity on demand, both to borrowers with open lines of credit and loan commitments (we use these terms interchangeably), and to depositors in the form of checking and other(a) transactions accounts. some(prenominal) contracts allow customers to receive cash on...If you want to come in a full essay, order it on our website: OrderEssay.net

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