We measure market reactions to announcements concerning liquidity regulation, a key innovation in the Basel framework. Our initial results show that liquidity regulation attracts negative abnormal returns. However, the price responses are less pronounced when coinciding announcements concerning capital regulation are backed out, suggesting that markets do not consider liquidity regulation to be binding. Bank- and country-specific characteristics also matter. Liquid balance sheets and high charter values increase abnormal returns while smaller long-term funding mismatches reduce abnormal returns. Banks located in countries with large government debt and tight interbank conditions or with prior domestic liquidity regulation display lower abnormal returns.

Market reaction to bank liquidity regulation

BRUNO, BRUNELLA;
2018

Abstract

We measure market reactions to announcements concerning liquidity regulation, a key innovation in the Basel framework. Our initial results show that liquidity regulation attracts negative abnormal returns. However, the price responses are less pronounced when coinciding announcements concerning capital regulation are backed out, suggesting that markets do not consider liquidity regulation to be binding. Bank- and country-specific characteristics also matter. Liquid balance sheets and high charter values increase abnormal returns while smaller long-term funding mismatches reduce abnormal returns. Banks located in countries with large government debt and tight interbank conditions or with prior domestic liquidity regulation display lower abnormal returns.
2018
2018
Bruno, Brunella; Onali, Enrico; Schaeck, Klaus
File in questo prodotto:
File Dimensione Formato  
bruno-Onali-Schaeck_JFQA-Accepted.pdf

non disponibili

Descrizione: articolo principale
Tipologia: Documento in Pre-print (Pre-print document)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 420.47 kB
Formato Adobe PDF
420.47 kB Adobe PDF   Visualizza/Apri
JFQA-Acceptance.pdf

non disponibili

Descrizione: Lettera di accettazione
Tipologia: Allegato per valutazione Bocconi (Attachment for Bocconi evaluation)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 78.61 kB
Formato Adobe PDF
78.61 kB Adobe PDF   Visualizza/Apri
BRUNO_market_reaction_to_bank_liquidity_regulation.pdf

non disponibili

Tipologia: Pdf editoriale (Publisher's layout)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 410.15 kB
Formato Adobe PDF
410.15 kB Adobe PDF   Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3993203
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 19
  • ???jsp.display-item.citation.isi??? 14
social impact