UFLSUnder-Frequency Load Shedding
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References in periodicals archive ?
To issue more UFL, the firm would be required in time to issue additional long-term (at-risk) debt.
Section 3 presents evidence that UFL holders at failing banks are prone to run and that those runs add to the cost of resolving those failures.
To be clear, we are not saying that reliance on UFL is the only feature that makes bank failures costly.
Second, UFL are runnable, which can lead to fire sales of assets that not only destroy value at the failing institution, but can also have spillover costs on other institutions with similar asset holdings.
In general, UFL increases with BHC size, primarily because of increasing reliance on uninsured deposits.
To test the hypothesis that UFL holders are prone to run when a bank is in distress, we turned to the FDIC database on failed banks.