The Big Smoke – in 2018, I plan to travel to the #7 in the ranking of the Global Financial Centres… Toronto! Weiterlesen
Together with my Ph.D. student David, we have analyzed liquidity risks and therefore finished the third article for his thesis.
The liquidity regulation of banks in Pillar 1 of the Basel framework does not consider funding cost risks of different bank business models. Therefore, we assemble a data set of balance sheet positions including maturities and use the method of Value-Liquidity-at-Risk to explore 118 European retail, wholesale, and trading banks. When examining liquidity-induced equity risks, trigged by exemplary rating shifts, we find that retail banks bear significantly lower funding cost risks than wholesale and trading banks. Consequently, a prudential regulation, which simultaneously considers the funding cost risk and the diversification of the banking system is recommended.
David Großmann & Peter Scholz (2017): The Golden Rule of Banking: Funding Cost Risks of Bank Business Models. SSRN Working Paper.