Banking and commerce: a liquidity approach

Report

Banking and commerce: a liquidity approach

By Bank for International Settlements (BIS)

Haubrich and Santos examine whether allowing banks to own commercial firms enhances or weakens financial intermediation. In their liquidity framework, integrating a non-financial firm can increase the resale value of collateral—because the conglomerate creates an internal market—thus improving banks’ ability to lend and resolve defaults.

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