Liquidity Risk Management and Bailout Strategies of Bangladeshi Commercial Banks

Abstract

Purpose: The aim of this study is to evaluate the bailout strategies for sound liquidity management of Bangladeshi Nationalized Commercial Banks.   Method: The researcher has selected six banks purposively as sample. A survey was conducted to gather opinions from 120 officials working in the treasury departments of these selected banks. The survey utilized a questionnaire and employed a direct approach. Subsequently, the collected data underwent analysis using common size statement analysis methodology. The survey encompassed various regulatory decisions pertaining to liquidity management.   Result and conclusion: The results indicate that within the scope of 07 distinct Acts, Laws, and Regulations, there exist 19 prescribed rules and limits. Among these, 07 rules adhere to the established standards, while 03 exceed the prescribed rules and limits, and 09 fall short of meeting the specified limits.   Implication of the research: The evaluation of bailout strategies offers valuable insights into enhancing liquidity management practices, potentially bolstering the stability of the banking sector. Besides, the identification of discrepancies between regulatory requirements and actual compliance underscores the need for stringent oversight and enforcement mechanisms. Lastly, by highlighting areas of non-compliance, the researcher recommends that Bangladesh Bank must critically review and monitor the rules regularly.   Originality: The originality of this research lies in its pioneering exploration of bailout strategies, offering novel insights into the regulatory landscape and practical implications for effective liquidity risk mitigation and financial stability in Bangladesh's banking sector.