## Bank Funding Structures and Risk: Evidence From the Global Financial Crisis

_IMF Working Papers, January 1, 2012_

## Source details

**Canonical URL:** [Bank Funding Structures and Risk: Evidence From the Global Financial Crisis](https://www.imf.org/en/publications/wp/issues/2016/12/31/bank-funding-structures-and-risk-evidence-from-the-global-financial-crisis-25676)

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## Bibliographic details
- Authors: Pablo Federico, Francisco F. Vazquez
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463933142.001

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### Major findings
- The paper analyzes the evolution of bank funding structures in the run up to the global financial crisis and studies the implications for financial stability using a bank-level dataset that covers about 11,000 banks in the U.S. and Europe during 2001?09.
- Banks with weaker structural liquidity in the pre-crisis period were more likely to fail afterward.
- Banks with higher leverage in the pre-crisis period were more likely to fail afterward.
- The likelihood of bank failure increases with bank risk-taking.
- In the cross-section:
  - Smaller domestically-oriented banks were relatively more vulnerable to liquidity risk.
  - Large cross-border banks were more susceptible to solvency risk due to excessive leverage.
- Macroeconomic and monetary conditions are related with the likelihood of bank failure.

### Policy implications and recommendations
- The results support the proposed Basel III regulations on structural liquidity and leverage.
- The evidence suggests emphasis should be placed on leverage regulations, particularly for systemically-important institutions.
- The link between macroeconomic and monetary conditions and bank failure likelihood provides a case for the introduction of a macro-prudential approach to banking regulation.

### Data, scope, and methodology notes
- Dataset covers about 11,000 banks in the U.S. and Europe during 2001?09.
- The study focuses on evolution of funding structures, structural liquidity, leverage, and bank risk-taking as predictors of failure.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/bank-funding-structures-and-risk-evidence-from-the-global-financial-crisis-25676_