Understanding the Crisis: Bank Funding Structures as Source of Instability
Volume: 24 Topics in Corporate Finance
Price: € 20.00
Understanding how banks fund themselves is of considerable importance. Leading up to the financial crisis banks became very dependent on short-term funding. What banks and policymakers have learned is that such dependence makes banks vulnerable to sudden-stops: investors may withdraw from these markets, and its availability may suddenly disappear. The overnight disappearance of access to these funding sources could induce acute liquidity problems. While a better capitalization of banks may help in mitigating this risk, and, indeed, this is the message of the previous contribution to this discussion series (see Topics in Corporate Finance 23), the funding models of banks deserve
a deeper analysis.
The Amsterdam Center for Corporate Finance is delighted that Dr Tanju Yorulmazer—a former economist at the Federal Reserve Bank of New York and the Bank of England, and currently on the faculty of the University of Amsterdam—has been found to elaborate on these issues. Professor Yorulmazer is one of the foremost experts on bank funding
models. In this contribution he elaborates on the sources of risk in the funding of banks, the fragility and disruptions in the various funding models, and the regulation that has been introduced to remedy potential problems.