Banks fearing the drought? Liquidity hoarding as a response to idiosyncratic interbank funding dry-ups

• We unravel a liquidity hoarding effect of bank idiosyncratic funding shocks. Shocks affecting headquarters lead to by regional branches. This triggers an asset reallocation in which branches’ lending decreases. The identification strategy is based on novel micro-data and diff-in-diff model. geographical fragmentation deposit limits shock-offsetting possibilities. investigate whether interbank shocks can trigger reaction their Shock-affected branches Brazilian banks increase liquid assets cut the shocks’ aftermath compared non-affected within same municipality, even absence market-wide freeze. These effects reliance internal vary depending banks’ access central emergency liquidity. Our findings suggest that ability offset