Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278475 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2799
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Flows of funds run by banks or by firms that belong to the same financial group as a bank are less volatile and less sensitive to bad past performance. This enables bank-affiliated funds to better weather distress and to hold lower precautionary cash buffers in comparison with their unaffiliated peers. Banks provide liquidity support to distressed affiliated funds by buying shares of those funds that are experiencing large outflows. This, in turn, diminishes the severity of strategic complementarities in investors' redemptions. Liquidity support and other benefits of bank affiliation are conditional on the financial health of the parent company. Distress in the banking system spills over to the mutual fund sector via ownership links. Our research highlights substantial dependencies between the banking system and the asset management industry, and identifies an important channel via which financial stability risks depend on the organisational structure of the financial sector.
Subjects: 
Mutual funds
Bank affiliation
Redemptions
JEL: 
G2
G23
G3
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5995-7
Document Type: 
Working Paper

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