DP10948 Double Bank Runs and Liquidity Risk Management
|Author(s):||Filippo Ippolito, José Luis Peydró, Andrea Polo, Enrico Sette|
|Publication Date:||November 2015|
|Keyword(s):||credit lines, financial crisis, liquidity risk, risk management, runs|
|JEL(s):||G01, G21, G28|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10948|
By providing liquidity to depositors and credit line borrowers, banks are exposed to double-runs on assets and liabilities. For identification, we exploit the 2007 freeze of the European interbank market and the Italian Credit Register. After the shock, there are sizeable, aggregate double-runs. In the cross-section, pre-shock interbank exposure is (unconditionally) unrelated to post-shock credit line drawdowns. However, conditioning on firm observable and unobservable characteristics, higher pre-shock interbank exposure implies more post-shock drawdowns. We show that is the result of active pre-shock liquidity risk management by more exposed banks granting credit lines to firms that run less in a crisis.