Do Banks Actively Manage Their Liquidity?

We test whether and how U.S. commercial banks actively managed their liquidity positions between 1992 and 2012, prior to the implementation of the Basel III liquidity rules. On average, the data are consistent with a liquidity management regime in which banks targeted the traditional loans-to-core deposits (LTCD) ratio. Perhaps surprisingly, the data are also consistent on average with the net stable funding ratio (NSFR), a regulatory liquidity...