Liquidity production in 21st century banking
By: Philip Strahan.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13798; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13798.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "I consider banks' role in providing funding liquidity (the ability to raise cash on demand) and market liquidity (the ability to trade assets at low cost), and how these roles have evolved.  Traditional banks made illiquid loans funded with liquid deposits, thus producing funding liquidity on the liability side of the balance sheet.  Deposits are less important in 21st century banks, but funding liquidity from lines of credit and loan commitments has become more important.  Banks also provide market liquidity as broker-dealers and traders in securities and derivatives markets, in loan syndication and sales, and in loan securitization.  Many institutions besides banks provide market liquidity in similar ways, but banks dominate in producing funding liquidity because of their comparative advantage in managing funding liquidity risk.  This advantage stems from the structure of bank balance sheets as well as their access to government-guaranteed deposits and central-bank liquidity"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/13/2008.

Includes bibliographical references.

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