Fed paper examines impact of liquidity rules on dealers
Dealers changed behaviour in response to reforms, but de-risking was already under way, paper finds
The liquidity coverage ratio (LCR) has induced US dealers to change their behaviour, although some de-risking was already under way after the 2008 crisis, according to a Federal Reserve working paper.
Liquidity regulation and financial intermediaries, by Marco Macchiavelli and Luke Pettit, draws on confidential data on dealers’ financing and positions as well as information on triparty repo transactions to uncover changing patterns of behaviour. The authors exploit the fact that US liquidity
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