Wholesale funding ‘dry-ups’ driven by bank quality, ESRB paper argues

liquidity
Authors argue that dry-ups “predict, but do not cause, future deterioration of bank performance”

During the recent financial crises, wholesale funding for Europe’s banks became harder to find if banks were of low quality, rather than because of a market-wide ‘freeze’, a working paper published by the European Systemic Risk Board argues.

Wholesale funding dry-ups, by Christophe Pérignon, David Thesmar and Guillaume Vuillemey, tests the existing literature on wholesale funding against data from the European markets from 2008 to 2014. Papers in the literature use one of two opposed types of

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