Professor Bruce Tuckman evaluates the utility of renewable financing for banks
— March 10, 2016
Excerpt from Bloomberg -- "Extendable deals are useful to reduce banks’ risk, according to Bruce Tuckman, a finance professor at New York University’s Stern School of Business. Yet they aren’t fool-proof during a crisis if many have a similar 30-day term because of mandates concerning liquidity-coverage ratios. ... 'These evergreens help you over the first bump in a crisis, but they won’t necessarily be around after that,' Tuckman, who’s also a senior fellow at research group Center for Financial Stability, said in an interview. 'We saw that during the financial crisis, when evergreen funding dried up as nobody wanted to offer it anymore. Also, if everyone is doing 30- or 31-day evergreens, then if we get into a liquidity crunch all the lenders will refuse to extend and start the countdown at the same time.'"