Double Bank Runs and Liquidity Risk Management

Peydró, José-Luis, Enrico Sette, Andrea Polo and Filippo Ippolito ()
Authors registered in the RePEc Author Service: Jose-Luis Peydro

No 10948, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Credit lines; Liquidity risk; Financial crisis; Risk management; Runs (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Double bank runs and liquidity risk management (2016)
Working Paper: Double bank runs and liquidity risk management (2016)
Working Paper: Double bank runs and liquidity risk management (2016)
Working Paper: Double Bank Runs and Liquidity Risk Management (2015)
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