Market conditions factor in liquidity costs: ECB paper

Euro sign, Frankfurt

An European Central Bank paper published on Thursday finds evidence that the price charged to banks for liquidity depends on factors other than its health.

Falko Fecht, Kjell Nyborg and Jörg Rocholl, the paper's authors, study the prices that individual banks pay for liquidity as a function of market conditions and bank characteristics. The authors say the price paid by banks depends in particular on the distribution of liquidity across banks and that they pay more for liquidity when positions

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