IDEAS home Printed from https://ideas.repec.org/p/gla/glaewp/2025_07.html
   My bibliography  Save this paper

Bank Capital Structure, Valuation Adjustments and Financial Market Liquidity

Author

Listed:
  • Mario Cerrato
  • Shengfeng Mei

Abstract

Valuation adjustments (XVAs) to systemic US banks' derivatives portfolios - caused by swings in their own creditworthiness and that of their clients; for example, COVID-19 has had a significant impact on their revenues and, therefore, market intermediation. This paper studies the implications of funding value adjustments (FVA) on banks' equity holders. Indeed, it is important to understand this implication, as dealers work in the interests of their shareholders. Therefore, intermediation could result in impairment when that cannot be achieved due to friction. Our findings offer critical insights into how financial institutions navigate valuation adjustments and their impact on banks' balance sheets and discuss policy implications related to the main results.

Suggested Citation

  • Mario Cerrato & Shengfeng Mei, 2025. "Bank Capital Structure, Valuation Adjustments and Financial Market Liquidity," Working Papers 2025_07, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2025_07
    as

    Download full text from publisher

    File URL: https://www.gla.ac.uk/media/Media_1169998_smxx.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    XVA; Banking; Financial Markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gla:glaewp:2025_07. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Business School Research Team (email available below). General contact details of provider: https://edirc.repec.org/data/dpglauk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.