01963cas a2200265 a 4500 AALejournalIMF015217 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475581805 1018-5941 BD-DhAAL BD-DhAAL Fungacova, Zuzana. High Liquidity Creation and Bank Failures : Do They Behave Differently? / Zuzana Fungacova, Rima Turk, Laurent Weill. Washington, D.C. : International Monetary Fund, 2015. 1 online resource (33 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students 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, which provides a natural field experiment due to numerous failures experienced over the past decade. Using Berger and Bouwman's (2009) liquidity creation measures as a comprehensive proxy for overall bank output, we find that high liquidity creation significantly increases the probability of bank failure; this finding survives multiple robustness checks. Our results suggest that regulatory authorities can mitigate systemic distress and reduce the costs of bank failures to society through early identification of high liquidity creators and enhanced monitoring of their funding and investment activities. Mode of access: Internet Turk, Rima. Weill, Laurent. IMF Working Papers; Working Paper ; No. 2015/103 Full text available on IMF http://elibrary.imf.org/view/journals/001/2015/103/001.2015.issue-103-en.xml IMF e-Library