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Holl, D., Schertler, A. The Liquidity Regulation and Savings Banks' Liquid Assets. Credit and Capital Markets – Kredit und Kapital, 43(4), 533-558. https://doi.org/10.3790/kuk.43.4.533
Holl, Dorothee and Schertler, Andrea "The Liquidity Regulation and Savings Banks' Liquid Assets" Credit and Capital Markets – Kredit und Kapital 43.4, 2010, 533-558. https://doi.org/10.3790/kuk.43.4.533
Holl, Dorothee/Schertler, Andrea (2010): The Liquidity Regulation and Savings Banks' Liquid Assets, in: Credit and Capital Markets – Kredit und Kapital, vol. 43, iss. 4, 533-558, [online] https://doi.org/10.3790/kuk.43.4.533

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The Liquidity Regulation and Savings Banks' Liquid Assets

Holl, Dorothee | Schertler, Andrea

Credit and Capital Markets – Kredit und Kapital, Vol. 43 (2010), Iss. 4 : pp. 533–558

2 Citations (CrossRef)

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Article Details

Author Details

Dorothee Holl, Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, D-60431 Frankfurt/M.

Dr. Andrea Schertler, Assistant Professor, University of Groningen, Faculty of Economics and Business, Finance Department, Nettelbosje 2, NL-9747 AE Groningen/Niederlande.

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    Schmielewski, Frank | Wein, Thomas

    Journal of Economics and Finance, Vol. 39 (2015), Iss. 3 P.518

    https://doi.org/10.1007/s12197-013-9266-y [Citations: 3]

Abstract

The Liquidity Regulation and Savings Banks' Liquid Assets

For their short-term payment obligations, savings banks hold substantially more liquid assets than the liquidity regulation requires. This paper investigates whether sight deposits, an important funding source for savings banks, help in explaining liquid asset holdings in excess of regulatory requirements. We analyze whether savings banks transform sight deposits in illiquid assets less intensively than is permitted because (i) the liquidity regulation underestimates actual withdrawal rates (underestimation effect) and/or (ii) savings banks are subject to limits in their lending to non-banks that they do not offset by, for instance, medium-term interbank lending or fixed asset holdings (lending effect). In our sample, we do not find the underestimation effect to be applicable as actual deposit withdrawal rates are in most cases lower than the regulatorily specified rate. However, we find the lending effect to be at work: Savings banks with low shares of loans to non-banks do not transform sight deposits into illiquid assets as intensively as savings banks with high shares of non-bank loans. Our analysis does not only show that liquid assets positively depend on sight deposits, but also shines a light on how bank size and the individual bank's position in the interbank market affect liquid assets. (JEL G21)