TY  - JOUR
AU  - Strahan, Philip E
AU  - Gatev, Evan
AU  - Schuermann, Til
TI  - How do Banks Manage Liquidity Risk? Evidence from Equity and Deposit Markets in the Fall of 1998
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10982
PY  - 2004
Y2  - December 2004
DO  - 10.3386/w10982
UR  - http://www.nber.org/papers/w10982
L1  - http://www.nber.org/papers/w10982.pdf
N1  - Author contact info:
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

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: til.schuermann@gmail.com
M1  - published as Evan Gatev, Til Schuermann, Philip Strahan. "How Do Banks Manage Liquidity Risk? Evidence from the Equity and Deposit Markets in the Fall of 1998 ," in Mark Carey and René M. Stulz, editors, "The Risks of Financial Institutions" University of Chicago Press (2006)

AB  - We report evidence from the equity market that unused loan commitments expose banks to systematic liquidity risk, especially during crises such as the one observed in the fall of 1998. We also find, however, that banks with higher levels of transactions deposits had lower risk during the 1998 crisis than other banks. These banks experienced large inflows of funds just as they were needed -- when liquidity demanded by firms taking down funds from commercial paper backup lines of credit peaked. Our evidence suggests that combining loan commitments with deposits mitigates liquidity risk, and that this deposit-lending synergy is especially powerful during period of crises as nervous investors move funds into their banks.
ER  -