Findings from Bank for International Settlements Yields New Data on Management Science (Central Bank Liquidity Backstops, Bank Regulation, and Risk-taking By Asset Managers): Business – Management Science

2025 JUN 11 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- New research on Business - Management Science is the subject of a report. According to news originating from Basel, Switzerland, by NewsRx correspondents, research stated, “Central bank liquidity backstops and bank leverage regulation interact across financial intermediaries and states of the world. A backstop is implemented only in some states to grease the wheels of bank dealers that absorb fire sales.”

Our news journalists obtained a quote from the research from Bank for International Settlements, “It also incentivizes asset managers to take on excessive redemption risk. Regulation binds in other states, in which it hamstrings market making. Because this outcome increases asset managers’ fire sale costs, it reins in their risk-taking. Empirically, we confirm such a disciplining effect of regulation on U.S. money market funds.”

According to the news editors, the research concluded: “Theoretically, we derive that the two policy measures complement each other in raising social welfare because they address different sources of redemption-driven losses-fire sale costs for given risk-taking and excessive risk-taking, respectively.”

This research has been peer-reviewed.

For more information on this research see: Central Bank Liquidity Backstops, Bank Regulation, and Risk-taking By Asset Managers. Management Science, 2025. Management Science can be contacted at: Informs, 5521 Research Park Dr, Suite 200, Catonsville, MD 21228, USA.

The news correspondents report that additional information may be obtained from Wenqian Huang, Bank for International Settlements, Monetary & Econ Res, Ch-4051 Basel, Switzerland. Additional authors for this research include Inaki Aldasoro and Nikola Tarashev.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1287/mnsc.2024.06997. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

(Our reports deliver fact-based news of research and discoveries from around the world.)