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How Have Banks Been Managing the Composition of High-Quality Liquid Assets?
We study banks' post-crisis liquidity management. We construct time series of U.S. banks' holdings of high-quality liquid assets (HQLA) and examine how these assets have been managed in recent years to comply with the Liquidity Coverage Ratio (LCR) requirement. We find that, in becoming LCR compliant, banks initially ramped up their stock of reserve balances. However, once the requirement was met, some banks subsequently shifted the compositions of their liquid portfolios significantly. This raises the question: What drives the compositions of banks? HQLA? We show that a risk-return framework ...
Trading Activities at Systemically Important Banks, Part 1 : Recent Trends in Trading Performance
Using a confidential data set collected daily by onsite supervisors, this note provides a comprehensive look at the performance of systemically important banks’ trading and market-making activities since the financial crisis.
Trading Activities at Systemically Important Banks, Part 3 : What Drives Trading Performance?
It is well known by now that before the financial crisis, systemically important banks and nonbank broker-dealers maintained large proprietary trading operations and had relied on those operations as a key source of trading revenue, in addition to revenue generated by facilitating clients' trading needs. This note aims to identify the key drivers of the trading performance of systemically important banks in the post-crisis period.
Trading Activities at Systemically Important Banks, Part 2 : What Happened during Recent Risk Events?
As documented in the FEDS Notes article "Trading Activities at Systemically Important Banks, Part 1: Recent Trends in Trading Performance," trading performance at systemically important banks, measured by trading revenue per dollar of value-at-risk (VaR) committed, has trended up over the past few years.
The Potential Increase in Corporate Debt Interest Rate Payments from Changes in the Federal Funds Rate
This note studies the response of interest expenses of U.S. nonfinancial corporations to an increase in interest rates.