Is there a Role for Funding in Explaining Recent U.S. Banks' Failures?

Author/Editor:

Pierluigi Bologna

Publication Date:

July 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper tests the role of different banks' liquidity funding structures in explaining the banks' failures, which occurred in the United States between 2007 and 2009. The results highlight that funding is indeed a significant factor in explaining banks' probability of default. By confirming the role of funding as the driver of banking crisis, the paper also recognizes that the new liquidity framework proposed by the Basel Committee on Banking Supervision appears to have the features to strenghten banks' liquidity conditions and improve financial stability. Its correct implementation together with closer supervision of banks' liquidity and funding conditions appear, however, the determinant for such improvements to be achieved.

Series:

Working Paper No. 2011/180

Subject:

English

Publication Date:

July 1, 2011

ISBN/ISSN:

9781462311286/1018-5941

Stock No:

WPIEA2011180

Pages:

28

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