BASEL III LIQUIDITY COVERAGE RATIO AND BANKS’ DEPOSIT FUNDING STRUCTURE:EVIDENCE FROM EMERGING MARKET ECONOMIES
Abstract
The global financial crisis of 2007–2009 exposed fundamental vulnerabilities in banks’ liquidity risk management practices. A defining characteristic of pre-crisis banking models was the excessive reliance on short-term wholesale funding instruments, including repurchase agreements and asset-backed commercial paper. While these instruments enabled rapid balance sheet expansion during periods of financial exuberance, they proved highly unstable under conditions of systemic stress. As market confidence deteriorated, wholesale funding markets contracted abruptly, triggering severe liquidity pressures across banking systems worldwide.
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