Full paper available here.
William Perraudin
The EBA has analysed the liquidity of different asset classes as part of its work for the European Commission on definitions to be employed in a European implementation of the Liquidity Coverage Ratio. This paper critically examines the EBA’s analysis, focussing on the exclusion of bid-ask spread data from the evidence employed. Using bid-ask spreads, we show that Asset-Backed Securities (ABS) and Covered Bonds (CB) do not exhibit radically different levels of liquidity in recent years. Furthermore, we show that, based on bid-ask spreads, some non-residential-mortgage-backed ABS (excluded from the LCR in the EBA proposals) have been more liquid than CBs.
