Systemic illiquidity in the interbank network

Gerardo Ferrara (), Sam Langfield (), Zijun Liu and Tomohiro Ota ()
Additional contact information
Tomohiro Ota: Formerly Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH

No 586, Bank of England working papers from Bank of England

Abstract: We study systemic illiquidity using a unique data set on UK banks’ daily cash flows, short-term interbank funding and liquid asset buffers. Failure to roll-over short-term funding or repay obligations when they fall due generates an externality in the form of systemic illiquidity. We simulate a model in which systemic illiquidity propagates in the interbank funding network over multiple days. In this setting, we show that systemic illiquidity is minimised by a macroprudential policy that skews the distribution of liquid assets towards banks that are important in the network.

Keywords: Interbank network; systemic risk; liquidity regulation; macroprudential policy (search for similar items in EconPapers)
JEL-codes: D85 E44 E58 G28 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016-04-08, Revised 2017-08-14
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... 430F02B544020555BDBC Full text (application/pdf)

Related works:
Journal Article: Systemic illiquidity in the interbank network (2019)
Working Paper: Systemic illiquidity in the interbank network (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0586

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().