02097cas a2200277 a 4500 AALejournalIMF016698 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513591131 1018-5941 BD-DhAAL BD-DhAAL Aymanns, Christoph. Bank Solvency and Funding Cost / Christoph Aymanns, Carlos Caceres, Christina Daniel, Liliana Schumacher. Washington, D.C. : International Monetary Fund, 2016. 1 online resource (30 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 Understanding the interaction between bank solvency and funding cost is a crucial pre-requisite for stress-testing. In this paper we study the sensitivity of bank funding cost to solvency measures while controlling for various other measures of bank fundamentals. The analysis includes two measures of bank funding cost: (a) average funding cost and (b) interbank funding cost as a proxy of wholesale funding cost. The main findings are: (1) Solvency is negatively and significantly related to measures of funding cost, but the effect is small in magnitude. (2) On average, the relationship is stronger for interbank funding cost than for average funding cost. (3) During periods of stress interbank funding cost is more sensitive to solvency than in normal times. Finally, (4) the relationship between funding cost and solvency appears to be non-linear, with higher sensitivity of funding cost at lower levels of solvency. Mode of access: Internet Caceres, Carlos. Daniel, Christina. Schumacher, Liliana. IMF Working Papers; Working Paper ; No. 2016/064 Full text available on IMF http://elibrary.imf.org/view/journals/001/2016/064/001.2016.issue-064-en.xml IMF e-Library