Liquidity Ratios of Polish Commercial Banks

Pavla Vodová

doi:10.18267/j.efaj.105

Abstract

As liquidity problems of some banks during global financial crisis reemphasized, liquidity is very important for functioning of financial markets and the banking sector. The aim of this paper is therefore to evaluate comprehensively the liquidity positions of Polish commercial banks via five different liquidity ratios in the period of 2001- 2011 and to find out whether the strategy for liquidity management differs by the size of the bank. The results enable us to conclude that liquidity of Polish banks has decreased in recent years, partly as a result of higher lending activity but mainly due to the financial crisis. Almost all Polish banks are sensitive to potential massive deposit withdrawals. Only some banks finance their lending activity by deposits; most banks are dependent on other sources of finance. Large and medium sized banks rely on the interbank market or on a liquidity assistance of the Lender of Last Resort, small banks hold buffer of liquid assets.

Highlights

The financial crisis showed the importance of adequate liquidity risk measurement and management
As the aim of this paper is to evaluate comprehensively the liquidity positions of Polish commercial banks via five different liquidity ratios in the period of 2001 – 2011 and to find out whether the strategy for liquidity risk management differs by the size of the bank, contribution of this paper is obvious
Financial crisis and bank liquidity can influence each other in both directions: financial crisis can be caused by poor bank liquidity; or poor bank liquidity can be a result of financial crisis

Summary

Introduction

The financial crisis showed the importance of adequate liquidity risk measurement and management. Many banks struggled to maintain adequate liquidity during global financial crisis (BIS, 2009). The situation was not so dramatic in Polish banking sector. There exist a relatively large number of studies which use liquidity ratios. Most of them use liquidity ratios only as an input for further analysis. Other studies focus more on the liquidity of the whole banking sector and so does not use the values of ratios of individual banks. As the aim of this paper is to evaluate comprehensively the liquidity positions of Polish commercial banks via five different liquidity ratios in the period of 2001 – 2011 and to find out whether the strategy for liquidity risk management differs by the size of the bank, contribution of this paper is obvious

Objectives

Results

Conclusion