Published in:Bank of England Working Paper ; No. 681
Extent:
1 Online-Ressource (26 p)
Language:
English
DOI:
10.2139/ssrn.3053799
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 13, 2017 erstellt
Description:
We study the interaction between solvency and funding costs at UK banks. We use the market-based leverage ratio as a proxy for market participants' perceptions of bank solvency. We investigate the impact that changes in this ratio have on banks' CDS premia, which are a proxy for their marginal cost of wholesale funding. We find that a negative shock to market participants' perception of banks' solvency leads to an increase in banks' marginal cost of wholesale funding. We find evidence that this negative relationship is nonlinear, i.e. the responsiveness of funding costs to a shock to solvency is greater at lower initial levels of solvency