The Basel III Accord imposes minimum liquidity standards on bank balance sheets that are already constrained by minimum capital standards. It is not clear whether or how banks' behaviors will change in this new joint-constraint regime. To gain some insight, we study the balance sheet liquidity...

The theory of financial intermediation highlights various channels through which capital and liquidity are interrelated. Using a simultaneous-equations framework, we investigate the relationship between bank capital buffer and liquidity for European and US publicly traded commercial banks from...

Using quarterly data of U.S. commercial banks, we investigate the impact of market liquidity shortages on banks' capitalization and balance sheet adjustments. Our findings reveal that an acute liquidity shortage leads small U.S. commercial banks, but not large ones, to positively adjust their...

The theory of financial intermediation highlights various channels through which capital and liquidity are interrelated. Using a simultaneous equations framework, we investigate the relationship between bank regulatory capital and bank liquidity measured from on-balance sheet positions for...

This conference presentation summarizes research on the impact of liquidity shocks on banks' capital and vice versa. From a regulatory point of view the question is whether capital and liquidity are complements or substitutes? The empirical work reviewed here asks how will banks respond to...