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Commonality under pressure: banks and funds

Author

Listed:
  • Matteo Aquilina
  • Giulio Cornelli
  • Nikola Tarashev

Abstract

We study the joint evolution of financial strain at banks and investment funds. When market pressure on banks intensifies from an elevated level, net flows decline at open-ended corporate bond mutual funds (MFs), corporate bond exchange-traded funds (ETFs) and prime money market funds alike. This commonality has risen materially over time for all three fund types. That said, bond ETFs can be a stabilising force, as salient features of their business model help attract investor inflows in times of stress. By contrast, outflows from bond MFs tend to contribute to a tightening of market conditions when banks are already under pressure.

Suggested Citation

  • Matteo Aquilina & Giulio Cornelli & Nikola Tarashev, 2025. "Commonality under pressure: banks and funds," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:2503e
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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