Template-Type: ReDIF-Paper 1.0
Author-Name: Carola Müller
Author-X-Name-First: Carola
Author-X-Name-Last: Müller
Author-Name: Matias Ossandon Busch
Author-X-Name-First: Matias
Author-X-Name-Last: Ossandon Busch
Author-Name: Miguel Sarmiento
Author-X-Name-First: Miguel
Author-X-Name-Last: Sarmiento
Author-Name: Freddy Pinzon-Puerto
Author-X-Name-First: Freddy
Author-X-Name-Last: Pinzon-Puerto
Title: Fragile wholesale deposits, liquidity risk, and banks' maturity transformation
Abstract: We investigate the impact of large-scale investment fund redemptions on bank lending. Using detailed data on the link between commercial banks and investment funds in an emerging economy, we document that redemptions lead to a decrease in the demand for certificates of deposit and increasing volatility in this wholesale funding market. We find that banks subject to the fund-induced fragility in their funding markets adjust credit terms: while credit volumes remain stable, terms of credit deteriorate. Affected banks raise interest rates and reduce the maturity of newly issued loans. These findings showcase that wholesale deposit runs affect banks' incentives to engage in maturity transformation.
Creation-Date: 2025-04
File-URL: https://www.bis.org/publ/work1263.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1263.htm
File-Format: text/html
Number: 1263
Keywords: uninsured deposits, wholesale funding, liquidity risk, credit supply, non-bank financial intermediaries
Classification-JEL: G01, G21, G23, E44, E58
Handle: RePEc:bis:biswps:1263