How Dynamic is Bank Liquidity, Including when the COVID-19 Pandemic First Set In?
Abstract: Banks need sufficient liquidity—cash and other assets that may be easily and immediately converted into cash—to meet their financial obligations, such as when households withdraw deposits or businesses tap credit lines. One key takeaway from the Global Financial Crisis of 2007–09 was that continuity of bank intermediation is particularly important in times of stress to limit pressure on the financial system, and that banks need to consistently maintain sufficient liquidity to achieve that outcome.
Part of Series: FEDS Notes
Publication Date: 2021-08-30