Title: Determinants of US commercial bank demand for short-term wholesale funds

Authors: Aaron DeSpain

Addresses: College of Business, St. Petersburg College, 13805 58th St. N, Clearwater, FL 33760, USA

Abstract: This study identifies determinants of short-term wholesale funding demand for the US commercial banking industry. Time series data consisting of macroeconomic and industry-specific variables are tested for significance in generating an empirical demand model. Four industry and two macroeconomic regressors are found to be significant in the demand for volatile liabilities. The results are intended to aid commercial banks and their regulators in forecasting long-term demand for wholesale funds, which may reduce over-reliance on volatile funding sources that can unnecessarily increase systemic financial industry risk. Proper forecasting of wholesale funds can provide lead time for banks to reduce their asset growth (through lending) targets, acquire additional deposits at a lower cost to fund projected growth, or both. The findings may also assist regulators in identifying financial institutions that are relying too heavily on short-term funding to finance long-term asset growth.

Keywords: US commercial bank; short-term wholesale funds; systemic risk; volatile liabilities; liquidity constraint; financial crisis.

DOI: 10.1504/AJFA.2023.136696

American Journal of Finance and Accounting, 2023 Vol.7 No.3/4, pp.169 - 187

Accepted: 15 Oct 2023
Published online: 16 Feb 2024 *

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