Liquidity risks raised crisis funding costs: Bank of Italy paper

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The increase in liquidity risk during the recent crisis forced market funding rates higher, forcing the systemic response from central banks, according to a Bank of Italy paper, published on Saturday.

Antonio De Socio, the paper's author, uses the three‐month Euribor and Eonia swap spread – two benchmark market rates in the eurozone – to evaluate the effects of the financial turmoil on the interbank market. The author says after August 2007 the plumbing system that supplied banks with wholesale

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