Next Article in Journal
Persistence of Bank Credit Default Swap Spreads
Previous Article in Journal
LIBOR Fallback and Quantitative Finance
Open AccessArticle

Liquidity Risk Drivers and Bank Business Models

1
Department of Economics, University of Messina, Piazza Pugliatti, 1, 98122 Messina, Italy
2
Department of Economics and Business, University of Catania, Corso Italia 55, 95129 Catania, Italy
*
Author to whom correspondence should be addressed.
Risks 2019, 7(3), 89; https://doi.org/10.3390/risks7030089
Received: 27 June 2019 / Revised: 21 August 2019 / Accepted: 23 August 2019 / Published: 25 August 2019
This paper examines the bank liquidity risk while using a maturity mismatch indicator of loans and deposits (LTDm) during a specific period. Core banking activities that are based on the process of maturity transformation are the most exposed to liquidity risk. The financial crisis in 2007–2009 highlighted the importance of liquidity to the functioning of both the financial markets and the banking sector. We investigate how characteristics of a bank, such as size, capital, and business model, are related to liquidity risk, while using a sample of European banks in the period after the financial crisis, from 2011 to 2017. While employing a generalized method of moment two-step estimator, we find that the banking size increases the liquidity risk, whereas capital is not an effective deterrent. Moreover, our findings reveal that, for savings banks, income diversification raises the liquidity risk while investment banks reliant on non-deposit funding decrease the exposure to liquidity risk. View Full-Text
Keywords: bank risk; business models; liquidity risk; maturity mismatch bank risk; business models; liquidity risk; maturity mismatch
MDPI and ACS Style

Galletta, S.; Mazzù, S. Liquidity Risk Drivers and Bank Business Models. Risks 2019, 7, 89.

Show more citation formats Show less citations formats
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Back to TopTop