TY  - JOUR
AU  - Gatev,Evan
AU  - Schuermann,Til
AU  - Strahan,Philip E.
TI  - Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12234
PY  - 2006
Y2  - May 2006
UR  - http://www.nber.org/papers/w12234
L1  - http://www.nber.org/papers/w12234.pdf
N1  - Author contact info:
Evan Gatev
Simon Fraser University
E-Mail: ega8@sfu.ca

Til Schuermann
Federal Reserve Bank of New York
33 Liberty Street
New York, NY  10045
E-Mail: no email available

Philip Strahan
Carroll School of Management
324B Fulton Hall
Boston College
Chestnut Hill, MA  02467
Tel: 617/552-6430
E-Mail: philip.strahan@bc.edu
M2  - featured in NBER digest on 2006-05-15
AB  - Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the increase is smaller for banks with high levels of transactions deposits. This deposit-lending risk management synergy becomes more powerful during periods of tight liquidity, when nervous investors move funds into their banks. Our results reverse the standard notion of liquidity risk at banks, where runs from depositors had been seen as the cause of trouble.
ER  -