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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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High Liquidity Creation and Bank Failures, Journal of Financial Stability December (2021). Fungáčová, Zuzana; Turk, Rima; Weill, Laurent

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
All authors as text Fungáčová, Zuzana; Turk, Rima; Weill, Laurent 
Number of authors
Status Published
Year of publication 2021 
Date 10.09.2021 
Name of article High Liquidity Creation and Bank Failures 
Name of journal Journal of Financial Stability
Volume of issue 57 
Number of issue December 
Abstract We formulate the “High Liquidity Creation Hypothesis” (HLCH) that a proliferation in the core activity of bank liquidity creation increases failure probability. We test the HLCH in the context of Russian banking, where many failures occurred albeit not triggered by swings in business cycles or an exogenous shock such as a crisis. Using Berger and Bouwman (2009) liquidity creation measures, we find that high liquidity creation is associated with greater probability of bank failure and this finding survives multiple robustness checks. Our results suggest that regulatory authorities can mitigate systemic distress and reduce the costs to society from bank failures through early identification of high liquidity creators.
Free text descriptor in Finnish pankit; likviditeetti; riskit; haavoittuvuus; Venäjä 
Free text descriptor in English Liquidity Creation, Bank Failures 
JEL-codes G21; G28 
ISSN / e-ISSN 1572-3089 
auki Internet addresses
Additional information Available online 10 September 2021.

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