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Keywords:LCR 

Discussion Paper
Large Bank Cash Balances and Liquidity Regulations

The liquidity needs of the largest U.S. commercial banks play an important role in understanding the banking system?s appetite for actual reserve holdings?bank reserve demand. In this post, the authors discuss the recent evolution of large bank cash balances, the effect of liquidity regulations on these balances, and how banks might react to changes in the supply of reserves.
Liberty Street Economics , Paper 20190715

Discussion Paper
How Do Large Banks Manage Their Cash?

As the aggregate supply of reserves shrinks and large banks implement liquidity regulations, they may follow a variety of liquidity management strategies depending on their business models and the interest rate differences between alternative liquid instruments. In this post, the authors provide new evidence on how large banks have managed their cash?the largest component of reserves?on a daily basis since the implementation of liquidity regulations.
Liberty Street Economics , Paper 20190717

Report
Bank Liquidity Creation, Systemic Risk, and Basel Liquidity Regulations

We find that banks subject to the Liquidity Coverage Ratio (LCR banks) create less liquidity per dollar of assets in the post-LCR period than non-LCR banks by, in part, lending less. However, we also find that LCR banks are more resilient as they contribute less to fire-sale risk, relative to non-LCR banks. We estimate the net after-tax benefits from reduced lending and fire-sale risk to be about 1.4 percent of assets in 2013:Q2-2014 for large banks. Our findings, which we show are unlikely to result from capital regulations, highlight the trade-off between lower liquidity creation and ...
Staff Reports , Paper 852

Working Paper
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 ...
Finance and Economics Discussion Series , Paper 2017-092

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