Discussion paper

DP10948 Double Bank Runs and Liquidity Risk Management

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.


Peydro, J, E Sette, A Polo and F Ippolito (2015), ‘DP10948 Double Bank Runs and Liquidity Risk Management‘, CEPR Discussion Paper No. 10948. CEPR Press, Paris & London. https://cepr.org/publications/dp10948