Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251199 
Year of Publication: 
2022
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 06/2022
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
In this paper we introduce two measures, the Systemic Liquidity Buffer (SLB) and the Systemic Liquidity Shortfall (SLS) to assess liquidity in the banking system. The SLB takes an aggregated perspective on liquidity risks in the banking system. In contrast, the SLS focusses on the problematic banks which suffer a liquidity shortfall. These measures provide an add-on to regulatory liquidity measures such as the LCR because they better incorporate a systemic perspective: (1) They model the impact of a funding shock by valuing assets at depressed market prices, (2) Doing so, they explicitly incorporate banks' strategic responses to a market undergoing sharp price declines. We test our approach using several applications capturing both a short (5 days) and a medium-term (30 days) stress scenario, a sudden rise in interest rates, the impact of banks' US dollar business and the recent COVID-19 crisis.
Subjects: 
Systemic liquidity risk
market liquidity
funding liquidity
contagion
fire sales
JEL: 
C63
G01
G17
G21
G28
ISBN: 
978-3-95729-874-4
Document Type: 
Working Paper

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