This policy brief examines how redemption shocks in investment funds can transmit to bank lending conditions through the withdrawal of wholesale deposits. Using granular Colombian data during the COVID-19 turmoil, we quantify funding losses and their impact on loan maturities, volumes, and rates. Results highlight the bank–fund nexus as a channel of systemic risk, with central bank liquidity facilities playing a key mitigating role.

Author(s):
Carola Müller | Bank for International Settlements (BIS)
Matias Ossandon Busch | CEMLA and IWH
Miguel Sarmiento | Central Bank of Colombia
Freddy Pinzon-Puerto | University of Chicago Booth School of Business

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SUERF Policy Brief No, 1254

This policy brief is based on BIS Working Papers No. 1263. The views expressed are those of the authors and not necessarily those of the institutions the authors are affiliated with.