Banks are central to payment systems. As the rest of the economy transacts using deposits, liquidity is churned among banks. Using transaction-level data from Fedwire, we measure US banks' liquidity risk induced by depositors' payments. Despite the large buildup of liquidity buffers after the global financial crisis, banks' liquidity management has become increasingly sensitive to payment liquidity risk.
Li et al. (Fri,) studied this question.
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