Template-Type: ReDIF-Paper 1.0
Author-Name: Iñaki Aldasoro
Author-X-Name-First: Iñaki
Author-X-Name-Last: Aldasoro
Author-Name: Florian Balke
Author-X-Name-First: Florian
Author-X-Name-Last: Balke
Author-Name: Andreas Barth
Author-X-Name-First: Andreas
Author-X-Name-Last: Barth
Author-Name: Egemen Eren
Author-X-Name-First: Egemen
Author-X-Name-Last: Eren
Title: Spillovers of funding dry ups
Abstract: We uncover a new channel for spillovers of funding dry-ups. The 2016 US money market fund (MMF) reform exogenously reduced unsecured MMF funding for some banks. We use novel data to trace those banks to a platform for corporate deposit funding. We show that intensified competition for corporate deposits spilled the funding squeeze over to other banks with no MMF exposure. These banks paid more for deposits, and their pool of funding providers deteriorated. Moreover, their lending volumes and margins declined, and their stocks underperformed. Our results suggest that banks' competitiveness in funding markets affect their competitiveness in lending markets.
Length: 57 pages
Creation-Date: 2019-09
File-URL: https://www.bis.org/publ/work810.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work810.htm
File-Format: text/html
Number: 810
Classification-JEL: G21, G28
Keywords: funding dry-ups, competition, spillovers, money market funds, corporate deposits, dollar funding
Handle: RePEc:bis:biswps:810