We study third-party loan guarantees in a model in which lenders can screen, learn loan quality over time and can sell loans before maturity when in need of liquidity. Loan guarantees improve market liquidity and reduce lending standards, with a positive overall welfare effect. Guarantees...

Like the rest of the world, Spain has suffered frequent financial crises and undergone several changes in its regulatory framework. There have been crises that have been followed by reforms of the financial structure, and also troubled financial times with no modification of the regulatory and...

The global market liquidity squeeze for securities that initiated in 2007 has increased pressure among banks to sell, pushed down prices, and impacted the market for interbank loans, leading to a funding gap at Northern Rock, Britain’s fifth largest mortgage bank. This paper presents an...

In this paper we introduce two measures, the Systemic Liquidity Buffer (SLB) and the Systemic Liquidity Shortfall (SLS) to assess liquidity in the banking system. The SLB takes an aggregated perspective on liquidity risks in the banking system. In contrast, the SLS focusses on the problematic...

Can central counterparty (CCP) clearing control counterparty risk in the presence of risk taking that can aggravate such risk? When counterparty risk is not observable, I show that central clearing leads to higher collateral requirements for two different reasons. Without collusion about risk...