Open AccessLiquidity, Synergy and Winner-take-all Effect
Author(s) -
Mingyuan Sun
Publication year - 2017
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v9n1p147
Subject(s) - market liquidity , balance sheet , business , loan , intermediary , liquidity risk , cash , balance (ability) , perspective (graphical) , financial intermediary , financial system , off balance sheet , monetary economics , finance , economics , computer science , medicine , artificial intelligence , physical medicine and rehabilitation
The synergy between deposit-taking and lending is the specialness of banking institutions as financial intermediaries. The activities from both balance sheet and off-balance sheet could share the cost of holding liquid assets, which is based on the fact that draw-downs on loan commitments and withdrawals on deposits are not perfectly correlated. However, it matters to reveal the dynamic connections between the two sources of liquidity risk for the purpose of analyzing the real impact on individual banks from a more microscopic perspective. As the evidence shows in this study, a winner-take-all effect is hidden in the synergy and could cause local double cash outflow from particular banks. It also provides new insights on liquidity management of commercial banks.