Abstract
Liquidity Management is the key to the success or failure of commercial banks irrespective of nature, sizes, and kinds. Although, liquidity is not directly link the generation of profits, but it enables commercial banks to use the funds for generating profits by maintaining economic size of liquidity. Liquidity management, being an integral part of commercial banks, faces numerous problems of different categories. So, a commercial bank has to identify the problems associated with liquidity planning and controlling in order to ensure more effective liquidity management. In view of this, the current study has been undertaken to identify some important problems associated with liquidity management of samples of fifty executive level managers of some private commercial banks in Bangladesh formed by employing sophisticated Varimax Rotated factor Analysis. The study has found that Regulatory and Policy Related Problems, Debt Instrument Problems and Foreign Exchange Market Related Problems are the main warnings that hinder the liquidity position of commercial banks. Keywords: Liquidity, Government Policy and Regulation, Debt Instrument and Foreign Exchange Market DOI : 10.7176/RJFA/10-4-10
Highlights
Like any other firm, a bank has to manage carefully its liquidity in order to be able to cover mismatches between future cash outflows and cash inflows
The bank could refuse to grant these new loans but this would in general lead to the loss of profit opportunities. This would be detrimental to the borrowing firm if it is credit rationed, and more general to the economy as a whole: we have to remember that banks are unique providers of liquidity to small and medium size enterprises, which constitute an important fraction of the private sector
4.1 Identification of Problems Associated with Liquidity Management on Mean Scores basis
Summary
A bank has to manage carefully its liquidity in order to be able to cover mismatches between future cash outflows and cash inflows. The bank could refuse to grant these new loans but this would in general lead to the loss of profit opportunities This would be detrimental to the borrowing firm if it is credit rationed, and more general to the economy as a whole: we have to remember that banks are unique providers of liquidity to small and medium size enterprises, which constitute an important fraction of the private sector. This credit rationing would be especially costly if the firm is forced to close down, possibly resulting in additional losses for the bank itself
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