Accessible Version
The Liquidity Coverage Ratio and Corporate Liquidity Management, Accessible Data
Figure 1A: Cumulative growth in credit lines to the corporate sector
The figure displays a line chart of the cumulative growth of credit lines to the corporate sector split between nonfinancial firms and nonbank financial firms over the period between the second quarter of 2013 and the first quarter of 2019. The cumulative growth of credit lines to the nonbank financial sector exceeds that of credit lines to the nonfinancial sector throughout the whole period and reaches 100 percent by the end of the period. In contrast, the cumulative growth of credit lines to the nonfinancial sector was only 40 percent over the same period.
Note: Panel A includes bank holding companies with total consolidated assets exceeding $50 billion subject to the standard or modified LCR. Panel B includes all bank holding companies that file consolidated FR Y-9C reports. Standard LCR banks are those with total assets exceeding $250 billion and modified LCR are banks with total assets between $50 and $250 billion. Source: FR Y-14 and FR Y-9C.
Figure 1B: Unused credit commitments to nonbank financial institutions as percent of total assets
The figure shows the time series variation in the total unused credit line commitments to nonbank financial institutions as percent of total bank assets for three groups of banks over a period between the second quarter of 2013 and the first quarter of 2019. The first group is large banks with total assets exceeding $250 billion that are subject to the standard liquidity coverage (LCR) requirement. For this group, the unused credit lines to nonbank financial institutions have increased from less than 4 percent of total assets to close to 8 percent of total assets by the end of the first quarter of 2019. The second group is banks with total assets between $50 and $250 billion that are subject to the less stringent modified liquidity coverage (LCR) requirement. Their off-balance sheet exposures to the nonbank financial sector have increased from less than two percent of their total assets to more than 3 percent. Finally, the third group are all smaller banks that are not subject to LCR have grown much less their unused credit lines to nonbanks. Their exposure to nonbank financials is less than 3 percent of total assets by the end of the period and is the smallest exposure among the three groups of banks.
Note: Panel A includes bank holding companies with total consolidated assets exceeding $50 billion subject to the standard or modified LCR. Panel B includes all bank holding companies that file consolidated FR Y-9C reports. Standard LCR banks are those with total assets exceeding $250 billion and modified LCR are banks with total assets between $50 and $250 billion. Source: FR Y-14 and FR Y-9C.
Figure 2A: The ratio of liquid assets to total assets
The chart shows the aggregate ratios of liquid assets to total assets for three groups of publicly traded corporations---bank holding companies, nonfinancial, and nonbank financial corporations—over a period between 2000 and 2018. The liquidity ratio for banks was stable at around 8 percentage points in the period prior to 2007. Since 2007 the ratio of liquid assets for banks has increased to reach close to 16 percent of assets. The liquidity ratio for nonbank financial institutions was higher in the pre-crisis period at around 12 percentage points of total assets. This ratio declines to around 8 percentage points in the post crisis period. Finally, the liquidity ratio of nonfinancial corporations exhibits an upward trend from around 6 percentage points to 10 percentage points over the same period.
Note: Liquid assets are defined as cash and cash equivalents. Includes all U.S. domiciled publicly traded companies. Banks and nonbank financial institutions are identified using industry classifications based on NAICs codes. Source: S&P Global, Compustat; S&P Global, CapitalIQ. The shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: March 2001–November 2001, and December 2007–June 2009.
Figure 2B: Total credit lines as a percent of liquid assets and credit lines
The figure shows the time variation of the ratios of total committed credit lines to the sum of liquid assets and credit lines for nonfinancial corporations and nonbank financial corporations. The ratio of credit lines to total committed liquidity for nonbank financial corporates has increased from an average of around 30 percent in the pre-crisis period to over 55 percent in the post-crisis period. The same ratio has also increased for nonfinancial corporations from around 45 percent in the pre-crisis period to around 50 percent in the post-crisis period.
Note: Liquid assets are defined as cash and cash equivalents. Includes all U.S. domiciled publicly traded companies. Banks and nonbank financial institutions are identified using industry classifications based on NAICs codes. Source: S&P Global, Compustat; S&P Global, CapitalIQ. The shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: March 2001–November 2001, and December 2007–June 2009.
Figure 3: HQLA-to-assets ratio
The figure shows the ratio of high-quality liquid assets to total assets for three groups of bank holding companies—standard LCR, modified LCR, and non-LCR bank holding companies. Prior to the 2007-2009 financial crisis, all three groups had low levels of HQLA that comprised less than 5 percent of their total assets. The HQLA to total assets ratio for the standard LCR bank holding companies increases significantly during and in the aftermath of the financial crisis to about 10 percent of total assets by the end of 2010. Following the Basel III and the U.S. proposals for the LCR, this ratio increases further to exceed 20 percent at the start of the LCR implementation period on January 1, 2016. Since the HQLA-to-assets ratio for standard LCR banks has declined to about 17 percent of total assets. The modified LCR group also increases its HQLA holdings over the same period but their level stays below that of the standard LCR group and reached about 12 percent of total assets by the end of the sample. The group of banks not subject to the LCR increased their holdings of HQLA to about 10 percent of total assets by 2010. Starting in 2010, non-LCR banks have been reducing their HQLA holdings and by the end of the sample period, their HQLA holdings are about 5 percent of total assets.
Note: An estimate of the regulatory high quality liquid assets (HQLA) is constructed as reserves plus estimates of securities that qualify as high-quality liquid assets as defined by the LCR. Level 1 assets, and haircuts and restrictions on Level 2 assets, are incorporated into the estimate. Vertical lines indicate different stages of the LCR implementation. Standard LCR banks are those with total consolidated assets above $250 billion. Modified LCR banks are all bank holding companies with assets between $50 and $250 billion. Non-LCR banks are banks with total assets below $50 billion. The shaded area spans the 2008-2009 recession based on NBER dates. Source: FR Y-9C
Figure 4: Scatter plot of the HQLA-to-assets ratio and the undrawn credit lines to nonbank financials
The figure consists of two regression line plots of the relationship between HQLA-to-total assets on the x-axis and the credit lines to nonbank financials as percent of total assets on the y-axis. Panel A regression line plot shows a slightly negative relationship between liquidity and credit line exposures to nonbank financials just prior to the finalized LCR rule as of September 31, 2013. Panel B shows a positive relationship between liquidity and credit line exposures to nonbank financials as of December 31, 2017, which is 12 months after the full implementation of the LCR.
Note: Includes bank holding companies with total consolidated assets exceeding $50 billion. The figure shows the predicted value of a linear univariate regression of HQLA-to-assets ratio and the ratio of total credit lines to nonbank financials as percent of total assets. In panel A, the coefficient estimate is statistically insignificant at -0.03 and the R-squared is virtually zero. In panel B, the coefficient estimate is statistically significant at 0.34 and the R-squared is 15 percent. The shaded areas show the interquartile standard error bands. Source: FR Y-14 and FR Y9C.
Figure 5: Provision of liquidity facilities to the corporate sector.
The figure shows a time series plot of the total outstanding amounts of liquidity facilities in billions of dollars to nonfinancial and nonbank financial corporations over the period from the second quarter of 2013 to the second quarter of 2019. The total outstanding amounts of liquidity facilities to nonfinancials are relatively stable and hover around $200 billion over the period. The total outstanding amounts of liquidity facilities to nonbank financials are relatively stable around $110 billion in the period between 2013 and the end of 2015. Starting in 2016, the outstanding amounts of liquidity facilities decline sharply and stabilize around $30 billion for the remaining part of the sample.
Note: Total committed amounts of liquidity facilities to back-up commercial paper and corporate bond issuance by sector in billions of dollars. Source: FR Y-14