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Journal of Financial Services Research

, Volume 48, Issue 3, pp 215–234 | Cite as

Banks’ Liquidity Buffers and the Role of Liquidity Regulation

  • Clemens Bonner
  • Iman van Lelyveld
  • Robert Zymek
Article
First Online:
Received:
Revised:
Accepted:

Abstract

We assess the determinants of banks’ liquidity holdings using data for nearly 7000 banks from 25 OECD countries. We highlight the role of several bank-specific, institutional and policy variables in shaping banks’ liquidity risk management. Our main question is whether liquidity regulation neutralizes banks’ incentives to hold liquid assets. Without liquidity regulation, the determinants of banks’ liquidity buffers are a combination of bank-specific and country-specific variables. While most incentives are neutralized by liquidity regulation, a bank’s disclosure requirements remain important. The complementarity of disclosure and liquidity requirements provides a strong rationale for considering them jointly in the design of regulation.

Keywords

Liquidity Financial regulation Disclosure Banks 

JEL Classifications

G20 G21 G28 
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Notes

Acknowledgments

This paper was conceived while Van Lelyveld and Zymek were at the Bank of England. We would like to thank Jack Bekooij for excellent statistical support, seminar participants at De Nederlandsche Bank, the Bank of England, the European Banking Authority, University of Osnabrueck as well as Jakob de Haan, Leo de Haan, Valeriya Dinger, Michel Heijdra, Paul Hilbers, Harry Huizinga, Jan Willem van den End, Lars Overby and Stefan Schmitz for comments and suggestions. The paper represents the authors’ opinions and not necessarily those of the affiliated institutions.

Supplementary material

10693_2014_207_MOESM1_ESM.pdf (74 kb)
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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Clemens Bonner
    • 1
    • 2
  • Iman van Lelyveld
    • 1
  • Robert Zymek
    • 3
  1. 1.De Nederlandsche BankAmsterdamthe Netherlands
  2. 2.CentERTilburg UniversityTilburgthe Netherlands
  3. 3.School of EconomicsUniversity of EdinburghEdinburghScotland

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