The size of banks’ balance sheets and the maturity structure of assets and liabilities is key to the generation of liquidity. Taking the view that banks manage their assets and liabilities independently of each other overlooks the structural interdependence between the asset side and the liability side of the balance sheet. First, at the individual bank level, once granted to customers, credit lines have very similar implications in terms of liquidity risk to overnight deposits, as the customers can draw down the deposits and the credit lines at their discretion, thereby gaining access to liquidity on demand in order to.
