Resilience of Canadian banks to funding liquidity shocks

Abstract

The agent-based model of Hałaj (2018) is calibrated to data from granular liquidity reporting by the largest banks in Canada. The model describes propagation and amplification of funding shocks between banks interacting on the interbank market. Some stylized stress-test scenarios of funding outflows are considered to show how the model can be used to assess two vulnerabilities of the banking system: funding liquidity (which is cyclical) and interconnectedness (which is structural).

Keywords

• Funding shock
• Agent-based model
• Banks
• Contagion