Funding liquidity and bank lending

Abstract

We investigate how funding liquidity affects the bank lending using a large sample of US bank holding companies. We document a consistent evidence of a lower loan growth for banks that rely more on deposits. The quantile regressions which dissect the lending behavior of banks at the right tail of loan growth distribution point out the leveraged effect of funding liquidity is larger in high-loangrowth banks. The negative effects of funding liquidity on lending seem to be clearer before the crisis and especially for large banks. Interestingly, we do not find any evidence of the relation between lending and funding liquidity after the crisis period. We believe our study is of interest to regulators and policymakers.

Bank lending during the COVID-19 pandemic: do alliances and digital strategies matter?

“…This indicates that state-owned banks were more countercyclical in their lending during the COVID-19 pandemic than private banks. This result is also closely related to Tran (2020), Bertay et al. (2015) and Brei and Schclarek (2013).…”

“…Aldasoro et al (2020) noted that COVID-19 produces a complex and varied set of consequences for banks and threatens the banking system's stability. Many studies showed different impacts of the global financial crisis depending on government-owned and private banks (Bertay et al, 2015;Brei and Schclarek, 2013;Cortes et al, 2019;Gambacorta et al, 2011;Tran, 2020).…”

“…Many studies showed different impacts of the global financial crisis depending on government-owned and private banks (Bertay et al. , 2015; Brei and Schclarek, 2013; Cortes et al ., 2019; Gambacorta et al ., 2011; Tran, 2020).…”

“…According to Caballero and Simsek (2009), the global financial crisis is contagious, much like a pandemic. A vast number of studies suggest that the global financial crisis has had varying effects on bank lending, which is dependent on the type of bank (Tran, 2020; Cortes et al ., 2019; Bertay et al. , 2015; Brei and Schclarek, 2013; Gambacorta et al ., 2011; Troshani et al ., 2011; Caudle et al ., 1991; Mishra et al ., 2021; Scott et al ., 2017; Dick, 2007).…”

Stock Market Liquidity during Periods of Distress and its Implications: Evidence from International Financial Markets

“…In finance literature, there are several definitions that are predominantly used to distinguish funding liquidity which relates to obtaining financing from market liquidity as a measure of market depth. As the term suggests, funding liquidity relates to the availability of credit in the market (Tran, 2020). Market liquidity on the other hand plays an important role in financial market analysis due to the perceived notion that fundamentals are usually based on liquidity drivers (Warsh, 2007).…”