Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269139 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2732
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We study how banks manage their liquidity among the various assets at their disposal. We exploit the introduction of the ECB's two-tier system which heterogeneously reduced the cost of additional reserves holdings. We find that the treated banks increase reserve holdings by borrowing on the interbank market, decreasing lending to affiliates of the same group, and selling marketable securities. We also find that banks have a preference for a stable portfolio composition of liquid assets over time. Our results imply that frictions in one market for liquidity can spill over to several markets.
Subjects: 
Bank liquidity
central bank reserves
money markets
government bonds
monetary policy implementation
JEL: 
G21
G11
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5319-1
Document Type: 
Working Paper

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