Bank Opacity and Safe Asset Moneyness

Sang Rae Kim

doi:10.1111/jmcb.13243

Bank Opacity and Safe Asset Moneyness

Research output: Contribution to journal › Article › peer-review

Abstract

A bank is more effective as a supplier of money-like safe assets when (i) its return on equity (ROE) is relatively lower and (ii) it is relatively more opaque about its balance sheet. A model is presented to support this, emphasizing that safe asset investors focus on the left tail of the collateral value distribution. Empirical tests on dealer banks and money market mutual funds' (MMFs') funding relationships confirm that higher ROE leads to MMF withdrawal due to lower moneyness of safe assets. Bank opacity mitigates the strength of this relationship, making it optimal for the banking system to maintain a certain level of opacity.

Original language	English
Journal	Journal of Money, Credit and Banking
DOIs	https://doi.org/10.1111/jmcb.13243
Publication status	Accepted/In press - 2024

Bibliographical note

Publisher Copyright:
© 2024 The Author(s). Journal of Money, Credit and Banking published by Wiley Periodicals LLC on behalf of Ohio State University.

Keywords

bank opacity
bank profitability
private money
safe asset
safe asset moneyness

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10.1111/jmcb.13243

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Bank Opacity and Safe Asset Moneyness

Abstract

Bibliographical note

Keywords

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