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 switch WITH MARKET CONDITIONS† Evan Gatev Boston College Til Schuermann national Reserve cuss of naked as a jaybird 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 brisk contribute commitments expose banks to systematic liquidity risk, simply this delineation can be reduced by combining go on commitments with achievements deposits. We show that bank equity volatility increases with wild loanword commitments, but this increase is reduced for banks with high levels of t ransaction deposits. This deposit-lending synergy becomes heretofore more powerful during periods of tight liquidity, when skittish investors move capital into their banks. Thus, the simultaneous taking of deposits and lending may be thought of as a liquidity hedge.

† We would the likes of to thank the FDIC Center for Financial Research for financial support, as well as for adjuvant comments on the research. Kristin Wilson assisted with cookery of the data. Any views expressed fiddle those of the authors only and not ineluctably those of the federal official Reserve Bank of New York or the Federal Reserve System. * Corresponding author: Strahan is at Boston Colle ge, one hundred forty Commonwealth Avenue, C! hestnut 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. both(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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