A Simple Macroprudential Liquidity Buffer
December 22, 2014
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Summary
A mechanism is proposed that aims to reduce the risk of a banking sector liquidity crisis—which is a quintessentially systemic event and thus the object of macroprudential policy—and moderate the effects of a crisis should one occur. The instrument would give banks more incentive to build up buffers of systemically liquid assets as a proportion of their total liabilities, yet these buffers would be usable in times of stress. The modalities of the instrument are considered with a view to making it effective, efficient, and robust.
Subject: Asset and liability management, Banking, Financial crises, Financial regulation and supervision, Liquidity, Liquidity requirements, Liquidity risk, Monetary policy, Reserve requirements
Keywords: bank, bank funding, Global, liquidity, liquidity characteristic, liquidity condition, liquidity mis-match, liquidity outflow, liquidity property, Liquidity requirements, liquidity ring fencing, Liquidity risk, liquidity shock, liquidity spiral, liquidity strain, LMC, Macroprudential instruments, MPLB balance, MPLB requirement, Reserve requirements, systemic risk, through-the-cycle MPLB level, WP
Pages:
24
Volume:
2014
DOI:
Issue:
235
Series:
Working Paper No. 2014/235
Stock No:
WPIEA2014235
ISBN:
9781498305778
ISSN:
1018-5941
