Bank of England: Systemic illiquidity in the interbank network

Staff Working Paper No. 586: Systemic illiquidity in the interbank network
Gerardo Ferrara, Sam Langfield, Zijun Liu and Tomohiro Ota
We study systemic illiquidity using a unique data set on UK banks’ daily cash flows, short-term interbank funding and liquid asset buffers. Failure to roll-over short-term funding or repay obligations when they fall due generates an externality in the form of systemic illiquidity. We simulate a model in which systemic illiquidity propagates in the interbank funding network over multiple days. In this setting, we show that systemic illiquidity is minimised by a macroprudential policy that skews the distribution of liquid assets towards banks that are important in the network.

Related Posts

Previous Post
Successful Blockchain Test in CDS Completed by Axoni, DTCC, Markit, and Multi-Bank Working Group
Next Post
Dealers speak their minds on US bond and repo market liquidity (Premium)

Fill out this field
Fill out this field
Please enter a valid email address.

X

Reset password

Create an account