Although there is inevitably some subjectivity involved in constructing these indexes, we try to minimize this subjectivity by relying as heavily as possible on the parameters in Basel III’s Net Stable Funding Ratio and Liquidity Coverage Ratio.11 With these indexes in hand, we can then aggregate up to create values for the asset illiquidity and liability stickiness of an entire intermediary sector.12 Figure 4 plots the results of this exercise using data as of year-end 2012.
As can be seen, there is a very tight cross-intermediary correlation between liability stickiness and asset illiquidity. At one end of the spectrum are money market funds and broker-dealers – prototypical shadow-bank-type institutions – with very low values of both, and at the other end are banks and life insurance companies.