Liquidity risk exposure for specialized and unspecialized real estate banks: evidence from the Italian market

Purpose of this paper The paper compares banks specialized on real estate lending (hereinafter REBs) with the overall market in order to the test if they are more or less exposed to liquidity risk. Design/methodology/approach Following the approach proposed by Basel Committee in order to evaluate the bank liquidity exposure, we compare the value of these measures between the REBs and all other banks for the Italian market. We perform also a panel regression analysis in order to identify the main drivers of the liquidity risk measures for the two types of banks. Findings No significant differences exist between REBs and the overall system if liquidity risk measures used by regulators in order to supervise the banking system are taken into account. Normally liquidity exposure by this type of banks is significantly affected by interbank market dynamics. Research limitations/implications The paper considers only one market in order to test the fitness of the regulatory approach for the REBs and does not take into account the off balance sheet exposure. Practical implications Even if REBs suffer from a misallingement between the asset and liability duration, the supervisory authority select measures that do not penalize them. What is original/value of paper The paper represents one of the first empirical analysis on the impact of regulatory requirements for liquidity management by the Basel Committee in order to test if the rules proposed could penalize banks specialized in real estate loans.