One-third of higher liquidity provisions were strategic: ECB paper

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A European Central Bank (ECB) paper, published on Thursday, says that not all banks suffered an increase in the cost of short-term funding during the subprime market crisis.

Nuno Cassola, Ali Hortaçsu and Jakub Kastl, the paper's authors, use bidding data from the ECB's auctions for one-week loans to examine European banks' demand for short-term funds during the summer 2007 subprime market crisis.

The econometric approach used allows the authors to decompose the dramatic upward shift in banks'

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