Bank Liquidity Risk Research Articles

The effect of financial repression policy on bank liquidity risk (evidence from Central Bank of Iran)

The effect of financial repression policy on bank liquidity risk (evidence from Central Bank of Iran)

The effect of financial repression policy on bank liquidity risk (evidence from Central Bank of Iran)

The effect of financial repression policy on bank liquidity risk (evidence from Central Bank of Iran)

Research on liquidity risk of commercial bank – from the view of comparison of Chinese and American commercial banks

The liquidity risk of commercial banks has become an important driver of the major risks in the modern economic system. This paper synthesizes the off balance sheet items which are often ignored in traditional bank liquidity researches, and uses the method of tracking and comparative analysis in different window periods to explore the liquidity changes and possible risks of Chinese commercial banks before, during and after the financial crisis. It is found that traditional loan projects, committed loan projects and demand deposits are important drivers of liquidity risk; Although the liquidity level of China’s banks is high, due to the high demand deposit rate, low core capital ratio, rapid loan growth and high non-performing rate, and the lack of risk prevention awareness, liquidity risk is still a major risk that China’s commercial banks need to face.

A model-based approach for estimation of liquidity risk of joint-stock commercial banks in Vietnam

The research attempts to identify the factors affecting liquidity risk of the joint-stock commercial banking system in Vietnam in the period 2008-2018. The research uses regression methods for panel data with a sample of 26 commercial banks, using secondary data collected from audited financial statements of commercial banks in Vietnam. The study performed FEM, REM, FGLS and D&K regression estimations and model’s tests. Through the SGMM method for panel data, the results show the liquidity risk of the previous year (LIQR), the liquidity of commercial banks (LIQ), the variable of the loan/total assets ratio (LTA), the ratio of credit growth (CRD), external financing ratio (EFD), credit risk provision ratio (LLP) have a positive impact on credit risk. In addition, the research results have not found statistically significant evidence on the factors of economic growth, inflation, money supply, the financial crisis affecting the liquidity risk in the case of Vietnam. This suggests important policy implications for commercial banks and the State Bank of Vietnam to control liquidity risk and to ensure the stability for the commercial banks in Vietnam.

Managing Banks Liquidity Risk with Interbank Market Liquidity in Nigeria: Matters Arising

Managing Banks Liquidity Risk with Interbank Market Liquidity in Nigeria: Matters Arising

Comparative Study of Credit Risk, Liquidity Risk, and Market Risk in Banking in Indonesia, Malaysia, and Thailand

The purpose of this study was to determine the differences in financial risk in several banks in Indonesia, Malaysia and Thailand. The population of this research is all commercial banks in Indonesia, Malaysia and Thailand. The sample selection technique used is purposive sampling. The analytical tool in this study is a comparative analysis with the Kruskal-Willis test. The results showed that there were significant differences in the NPL, LDR, and NIM variables of banking in Indonesia, Malaysia and Thailand.

Liquidity risk and regulation in the Organization of the Islamic Cooperation (OIC) banking industry

The recurring crises have evidenced poor liquidity risk management and ineffective regulation in banking. Consequently, banking regulations have undergone continuous reforms to bolster stability in the banking system. Nonetheless, theoretical and empirical evidence provide conflicting results that warrant comprehensive research, particularly for emerging Islamic banking. This study examines the role of banking regulation on the liquidity risk of 245 conventional banks and 68 Islamic banks from selected 14 Organization of the Islamic Cooperation (OIC) from 2000 to 2017 utilising the dynamic panel GMM (generalized method of moments) technique. We measure liquidity risk using the Net Stable Funding Ratio (NSFR) and the total financing-to-total deposits and short-term funding (LDEP). Meanwhile, the regulatory measures are asset restriction (AR), private monitoring (PM), supervisory power (SP) and capital requirements (CR). The findings suggest that regulation has a limited impact on bank liquidity risk. The CR supports the value creation of regulation through the reduction in banks’ liquidity risks, while PM and SP are agency costs of regulation that lead to higher liquidity risks. The impact of CR is lower on liquidity risk in Islamic banking than conventional ones, probably due to limited Islamic liquidity risk management facilities. Thus, regulators should strengthen Islamic liquidity risk instruments and markets to facilitate Islamic banking growth.

FACTORS AFFECTING LIQUIDITY RISK- AN EMPIRICAL ANALYSIS ON TURKISH BANKING SECTOR

The aim of this study is to determine the factors affecting the liquidity risk of deposit banks in Turkey. In this context, 10 deposit banks with the highest asset size according to their 2020 end of year financial tables were included to the sample and the quarterly data for the 2010-2020 period were tested by static panel data analysis. According to the model results, it is determined that "Equity / Total Assets", "Money Market Funds/Total Assets" and "Inflation" variables affect the liquidity risk. It is also important and specific for the study that the “Money Market Funds/Total Assets” ratio is a determining factor in the liquidity risk, in terms of the literature contribution of the study.

The Impact of Macroeconomic Factors on Banks Liquidity Risk: Evidence From Pakistan

The aim of the study is to identify the factors that influence liquidity risks of the banks by considering the panel of 18 top listed banks in Pakistan during a period of 2010 -2016. The study employed panel random effect regression model to absorb time-invariant shocks, which gives robust inferences. The results of liquidity risk confirmed that the country’s economic growth and price inflation further escalates liquidly risk while, FDI inflows reduces liquidity risks in Pakistani’s banks, thus it is concluded that bank’s liquidity risks required easy monetary policy to advancing loans and charging low interest rate, which ultimately will increase ROA, and ROE, while it would helpful to decrease high risk of bank’s liquidly in a given country.

Bank Liquidity Risk and Capital Structure: A Conceptual Review of Theoretical and Empirical Research on Islamic Banking Perspective

This paper conducts a comprehensive review of relevant empirical literature on the impact of capital structure on bank’s liquidity risk. Based on the existing literature, capital structure has a considerable impact on banks’ liquidity risk either in positive or negative thought. However, we discover that empirical evidence on all of this relationship is heavily skewed in favour of conventional banks and firm’s perspective. As a result, we urge that further research should be done in this area specifically in Islamic banking standpoint in order to gain a better understanding of the impact of capital structure on banks liquidity risk. This is due to the fact that the optimal capital structure for bank will trade-off the effects of bank capital specifically on the liquidity creation. Therefore, it is hoped that this paper can give a guideline to the policymakers, banking regulators, shareholders and other stakeholders to balance between capital structure and liquidity creation in order to evade from the issues of bank run and insolvency.

The impact of bank liquidity risk on risk-taking and bank lending: evidence from European bank

Objective – This paper uses a sample of annual observations of European banks to examine whether the liquidity risk affects a bank’s risk-taking behavior and its future loan growth. Methodology – A sample of European banks (27 member countries of the European Union plus U.K.) over the period of 2005 to 2019 are used in this study. Liquidity risk is measured by the ratio of liquid assets to total assets. Given the longitudinal nature of the data, the authors use panel regression with bank fixed effects to control for unobserved characteristics that might affect the dependent variable. Findings – The authors find that banks holding more liquid assets take less risk and show a higher subsequent loan growth rate. These results hold for both small and large banks. Novelty – To the authors’ best knowledge, this is one of the earliest studies to carefully examine the effects of liquidity risk on risk-taking behavior and loan growth rate for European banks. Our research suggests that the current Basel III requirement on liquidity ratio can decrease bank’s risking-taking behavior while not necessarily impact their future loan growth. Type of Paper: Empirical JEL Classification: G21, G01, G18. Keywords: Bank Liquidity Risk; Risk-taking Behavior; Loan Growth; Basel III

Bank Liquidity Risk: Significance of Financial Disclosure and Governance Practice

The objective of the study is to show the remedial effect of bank liquidity risk in the marketplace by disseminating financial information and practicing corporate governance mechanisms. The link between financial disclosure, corporate governance, and banks' liquidity risk management in Bangladesh is examined in this paper. The study used panel data on 32 commercial banks from the 2008 to 2018 with 346 observations collected from published annual reports. Based on the preliminary diagnosis, the study chose the two-stage least squares (2SLS) regression method to minimize the errors arising from heteroskedasticity, autocorrelation, and endogeneity issues. The study found that adequate financial disclosure and corporate governance practices minimize bank liquidity risk to maintain a stable image in the minds of investors and withstand immense regulatory pressure. To allow banks to detect issues early, they must implement changes quickly and be more robust to crises, thus risk management efficacy and excellent corporate governance implementation are required. Moreover, banks are mainly concerned about liquidity risk as it directly affects the market's performance and stability. Liquidity crises can be eradicated by proper monitoring and providing information pertaining to risks to prudent investors in a reliable and transparent corporate culture.

Real Estate Credit and Liquidity Risk with Ownership Structure as Moderating Variables in Banking Companies Listed on The Indonesia Stock Exchange

The purpose of this study is to investigate the effect of real estate credit on liquidity risk. This study also looked at the role of government ownership and foreign ownership in moderating the effect of real estate credit on bank liquidity risk. There are 43 banking companies listed on the Indonesia Stock Exchange for the 2014-2018 period used as samples. This study used a multiple linear regression model with the Ordinary Least Square (OLS) estimation method and robustness tests using the Maximum Likelihood (MLE) estimation method. The results of this study concluded that real estate credit has a significant positive effect on liquidity risk. Government ownership strengthens the positive effect of real estate credit on liquidity risk, while foreign ownership weakens the positive effect of real estate credit on liquidity risk.

Liquidity Risk of Conventional Banking: A Case of Pre- and Post-Financial Crisis-2008

The global financial crisis had an enormous impact on financial institutions the world over, and Pakistan was never an exemption. Hence this paper investigates the post-financial crisis liquidity risk of conventional banks in Pakistan in consortium with the pre-financial crisis-2008. Methodologically, 15 of 20 conventional banks were selected as a sample, while paired sample t-test was instrumentalized to measuring the pre- and post-financial crisis liquidity risk amongst the sampled banks. As part of the research objectives, the paper equally looks at the chances of the bankruptcy of these institutions through the Altman's Z-Score tool. The paper shows that liquidity risk in the pre and the immediate year following the financial crisis was marginal and insignificant; however, the liquidity risk bar rises and becomes pronounced in the following year. Though the allied demise in Pakistan financial market felt the ruthlessness of this collapse is not comprehensive enough to demolish the financial stability of Pakistan. In addition, despite the sounding performance of Pakistan banking system in the pre and post-financial crisis, the Altman's Z-Score tool is indicative of bankruptcy creeping up amongst the sampled banks in the near future

Analisis Faktor – Faktor yang Mempengaruhi Risiko Likuiditas

Liquidity risk is the ability of a bank to fulfill a predetermined obligation at maturity. Measurement of liquidity risk can be seen in the short and long term through: DER, FDR, Inflation, NPF. The data used are secondary data based on observations of the liquidity risk of Islamic banks and conventional banks from 2007 to 2016. Data collection is also obtained from the Sharia Banking Statistics Report published by the Financial Services Authority and Bank Indonesia. Descriptive research methods and data analysis techniques using multiple regression analysis model) with the ECM (Error Correction Model) approach. Overall, both the short and long term DER variables on Liquidity Risk show a significant relationship, as well as the FDR variable on Liquidity Risk shows a significant relationship, the inflation variable on liquidity risk shows a significant relationship, the NPF variable on liquidity risk in the short term it shows no significant relationship, on the other hand, the NPF variable on liquidity risk in the long term shows a significant relationship

Does Financing Structure Relates to Liquidity Risk? A Comparative Study of Islamic and Conventional Banks of Pakistan

The purpose of this paper is to find out whether financing in specific sectors increase bank liquidity risk and how this goes on with both Islamic and conventional banks. The paper used pooled regression, fixed effect model and random effect model decided on the basis of dummy joint significant test. The result shows that only financing concentration (SPEC) proved to have significant association with Islamic and overall banking sector for short run. And all other banks specific variables are unable to show a significant result. While the macroeconomic variable GDP and Inflation have a strong relationship in both long run and short run time period. This paper add value to the existing literature on liquidity risk under the new indicators issued by Basel III.

Market Power and Bank Liquidity Risk: Implementations of Basel III using Net Stable Funding Ratio Approach

Net Stable Funding Ratio (NSFR) published by Basel III as a new standard of bank liquidity risk management. In Indonesia, the Financial Services Authority (OJK) issued the OJK Regulation No. 50/POJK. 03/2017 concerning the obligation to fulfill the NSFR for commercial banks. The research objective is to test the influence of bank market power of assets, loans, and third-party funds toward bank's liquidity risk that measured by NSFR. The research uses a data panel from 37 commercial banks in Indonesia in the period 2018Q1-2019Q4. The hypotheses are examined by using linear regression methods with a random effect model. The result shows that the effect of market power on the risk of bank liquidity is proved. Market power will increase the NSFR, which means the higher the market power, the better management of liquidity risk. This research is expected to contribute theoretically to provide the latest literature on the application of Basel III through the NSFR approach, a current measurement for bank liquidity risk. Furthermore, this research is expected to contribute practically to banks and regulators in the formulation of policies related to market control and bank liquidity risk management. Based on the result, financial consolidation to enhance market power can be a solution to encourage bank liquidity. DOI : https://doi.org/10.26905/jkdp.v25i2.5525

Determinants Of Liquidity Risk: A Study Of Commercial Banks In Pakistan

The aim of this research is to examine the determinants of liquidity risk of commercial banks in Pakistan. For this research, the data of 20 commercial banks of Pakistan is collected annually for eight years ranging from 2012-2020. This study uses the Panel data regression analysis approach. Liquidity ratio as a dependent variable has been selected as measures liquidity risk whereas five independent variables size of bank, liquid assets ratio, capital adequacy ratio, Leverage, Non-performing loans have been selected for different types of bank-specific factors. Fixed effect regression analysis and random effect analysis has been performed, the Hausman test used to see whether the fixed effect model or random model is suitable. The findings of this study are beneficial for policymaker, manager, economic agents to control on risk factors. The results of this study show the size of bank (SOB), liquid assets ratio (LAR), capital adequacy ratio (CAR) has a negative and statistically significant effect on liquidity ratio. However, Leverage (LEV) has a positive and statistically significant effect on liquidity risk meaning that increase in leverage increase the liquidity risk but Non-performing loans (NPLs) has a negative and statistically insignificant relationship with liquidity risk.

Technology as Liquidity Risk of Banks in Indonesia

This study aims to analyze the factors affecting information technology as liquidity risk of Islamic banks in Indonesia. Information technology as a trade off has liquidity risk in banking business activities. The components are suspected to influence Technology as liquidity risk(CR) are Capital(CAR), Profitability(ROA), Market Risk(NPL) and Size of Firm. The exploration technique utilized is informative review and quantitative strategies. Time arrangement information from the period 2008-2016. The information source utilized is auxiliary information from the measurement investigates Islamic Banking insights is taken from the Indonesian Financial Services Authority. Information is then examined utilizing various relapse investigation. The outcome showsthat Market Risk and Size of Firm has a huge positive effect on Technology as liquidity chance, while Bank Capital and Profitability has a positive however unimportant effect on Technology as liquidity chance.

ESTIMATION OF CREDIT RISK LOSSES AND MODELING OF BANK LIQUIDITY RISK

The recent crisis in the banking system has shown that the functions of banking risk management have not been given sufficient attention. This jeopardized the efficiency of the entire domestic banking system. Insufficient efficiency of the risk assessment and modeling system in domestic banks has led to a number of negative consequences for the Ukrainian economy as a whole. Therefore, the problem of developing scientific and methodological approaches to the assessment and modeling of banking risks is relevant and of practical importance. The purpose of the article is to assess credit risk losses, model liquidity risk of banks and develop practical recommendations for the introduction of modeling of liquidity risk in the activities of domestic banks. Approaches to defining the concept of banking risk are analyzed. It is established that banks operate in conditions of high credit risks which result in significant amounts of non-performing loans. Credit risk losses were assessed according to the scenarios of compromise and aggressive risk lending position. The Van Den-End liquidity stress testing model was used as a tool to identify negative market effects and financial liquidity shocks. The general tendency of the ratio of liquidity buffer to liquidity deficit taking into account the risk is determined and substantiated and the forecast for the future period is made. We found that the efficiency of the bank’s loan portfolio is low. However, there is a dynamic increase in the efficiency of the bank’s loan portfolio from 0.00982 at the beginning to 0.09447 at the end of the year. This trend is positive. According to the results of the simulation, we found that with a sufficient amount of liquidity buffers of assets in JSC “PrivatBank” their quality remains low, because the share of secondary reserves in the bank is critically low. The bank is state-owned and is constantly refinanced on the interbank credit market. This allows the bank to work only on the first stage of the scenario of this model. The bank is practically protected from risk shocks by government securities.