Bank Liquidity Research Articles

Relation between Liquidity and Profitability of Nabil Bank and Everest Bank Limited

This research aims to examine the relationship between liquidity and profitability, focusing on two prominent commercial banks in Nepal: NABIL Bank Limited and Everest Bank Limited (EBL). The study utilizes correlation and regression analyses to investigate the impact of liquidity on the profitability of these two banks. The main findings of the study are derived from the analysis of financial data. The study employs a quantitative research approach, utilizing financial data from both banks over a ten-year period (i.e., 2012/13 to 2021/22). Various liquidity and profitability ratios, including credit to total deposit ratio, cash and bank balance to total deposit ratio, total liquid fund to total deposit ratio, a total liquid fund to current liabilities ratio, asset quality ratio and return on assets, are calculated and analyzed. Findings reveal that while there is no significant relationship between certain liquidity ratios and profitability, the cash and bank balance to total deposit ratio (CABTDR) positively influences profitability for NABIL. Additionally, the total liquid fund to total deposit ratio (LFTDR) and total liquid fund to current liabilities ratio (LFTCLR) negatively impact profitability in both banks. The study emphasizes the importance of maintaining optimal liquidity levels and improving asset quality to enhance profitability. Overall, liquidity's influence on profitability is relatively weaker compared to asset quality.

Determinants of Corporate Credit Growth in Ukraine: The Application of Bank Lending Survey Data

This study investigates the determinants of corporate lending in Ukraine, with a focus on distinguishing between supply and demand factors. It uses a two-step process to build a credit standards index (CSI) based on disaggregated data from a Ukrainian bank lending survey (BLS). This paper describes the factors that are significant for corporate lending development in Ukraine. It contributes to the existing literature by developing a measure of corporate loan supply and analyzing its ability to explain corporate credit growth in Ukraine by using bank-level BLS data. First, a panel ordered logit model is used to transform categorical data into a continuous index that measures the likelihood of credit standard tightening. Second, the study examines how this index affects new corporate lending in both national and foreign currencies. It is found that the credit standard index is influenced by exchange rate movements (with depreciations leading to tighter standards), bank liquidity, and bank competition. It is also demonstrated that the CSI has a negative impact on corporate loans in national currency, with a more pronounced effect on smaller banks.

ВИЗНАЧЕННЯ РИНКОВОЇ МОДЕЛІ ВІТЧИЗНЯНОГО ДЕПОЗИТНОГО РИНКУ: АНАЛІЗ КОНЦЕНТРАЦІЇ

The effective functioning of the domestic deposit market presupposes the presence of positive dynamics regarding the equal placement of free funds of legal entities and individuals in the accounts of all functioning banks at the optimal level of the interest rate on deposits. It is under such conditions that the studied market would present a model of perfect competition. However, the conducted research confirmed the fact that the domestic deposit market is not an example of a model of free (unrestricted) competition. With the use of official NBU data and well-known methods for determining the level of market power (concentration coefficient, Herfindahl-Hirschman index), we found a generally "moderate concentration" of the studied market, which allows us to characterize it as a market model of monopolistic competition, despite the fact that over the past four years state banks in Ukraine demonstrated significant (in their favor) differences in the share of population deposits compared to private and foreign banks. In the Ukrainian deposit market, in general, there is an outflow of funds from deposit accounts, which is explained, first of all, by low interest rates on deposits. In this context, it is extremely important for banks to intensify efforts to introduce new deposit products, thereby creating opportunities to increase term deposits, which, among other opportunities for accumulating funds, are relatively stable. They are one of the important sources of financing assets, increasing the liquidity and solvency of banks, intensifying credit and investment activities and, in general, supporting the financial stability of the country's banking system.

Determinants Of Non-Performing Loans In Indonesia

Non-performing loans (NPLs) are a typical sign of stress testing from financial institutions and may be used to measure the financial system's health. The critical criterion for achieving financial system stability is macroeconomic stability. Instability in the financial system (financial crisis) impairs a bank's liquidity and might lead to more problematic loans, impacting other industries. The association between NPL and numerous macroeconomic variables, including Interest Rate Spreads, Inflation, Percentage of Open Disruption, and Amount of Foreign Exchange Reserves in Indonesia, is examined in this paper. The study used the Vector Error Correction Model (VECM) method to estimate data for a sample period of 2000 to 2020. In the long run, inflation factors, the number of open jobless, and the number of foreign exchange reserves all substantially impacted the ratio of non-performing loans, according to the findings. However, no variables influenced the percentage of non-performing loans in the short run.

Місія банків за участю держави в капіталі у відновленні економіки

Introduction. The global pandemic crisis of 2019-2021 and the war of 2022 have exacerbated problems in the economy. In the extreme conditions of martial law, the domestic financial system demonstrated its institutional capacity, prevented a panic among creditors and kept the country's money circulation stable. In addition, millions of forced migrants were provided with the opportunity to pay in Europe with payment cards issued by Ukrainian banks in hryvnia. Problem Statement. Current risks of the global financial crisis and the role of state-owned banks in supporting the economic growth in the conditions of martial law and the post-war recovery of Ukraine's economy. Purpose. The goal is to provide proposals for neutralizing negative economic phenomena in the country and to justify changes to the development strategy of banks with the participation of the state in the capital. Methods. The research is based on the identification of patterns of the financial sector development as a whole and the banking system in particular; systemic approach - when clarifying interrelationships between its institutions; statistical comparisons and groupings, analysis and synthesis - in the process of researching monetary environment, forming and placing the resource potential of banks. Results. The main problems in the world economy and how they affect the current situation in Ukraine are considered. To a large extent, the capacity of the financial system has been achieved thanks to the market behavior of banks with the participation of the state in the capital (hereinafter - BDK), which occupy dominant positions on the market. The question of their role and place in the post-war reconstruction economy is of importance. Conclusions. It is expedient to expand the BDK network to the municipal level. In order to increase the liquidity of banks, the creation of a state company to work with negatively classified assets that were damaged as a result of military operations is justified. Changes are proposed in a number of provisions of the BDK development strategy until 2025. In order to generate a long-term credit resource, there is a need to establish a national bank for reconstruction and development through the restructuring of one of the BDKs, as well as the Company for the management of negatively classified assets to clean up the balance sheets of the BDK. The government’s investment activity is expected to increase in order to develop priority programs in the defense, energy and infrastructure sectors.

Does the Development of Money Market Funds in China Increase the Bank Liquidity Risk?

Abstract This paper studies the relationship between money market funds (MMFs) and bank liquidity risk in China. Based on the unique feature of "liquidity stratification" in China, the paper proposes a model of interbank market that includes big banks, small banks, and MMFs. The model drives that the emergence of MMFs pushes up the interbank liability ratio of the banking system and raises the bank liquidity risk. Using unbalanced bank-level panel data from China for the period from 2014 to 2021, we find that the empirical results are consistent with the theory. It is shown that the expansion of MMFs significantly elevates the bank liquidity risk in general, but this effect varies significantly by bank type, bank size, and different capital adequacy ratio. Moreover, the interbank liability channel plays an important mediating transmission role in the process of MMFs affecting bank liquidity risk. Keywords: Money market funds, Bank liquidity risk, Interbank liability channel.

Bank liquidity and the risk-taking channel of monetary policy: An empirical study of the banking system in China.

This paper addresses the impact of bank liquidity on risk-taking behaviour of Chinese banks, and provides evidence for a risk-taking channel of monetary policy operating through bank liquidity. By using bank-level panel data from 123 Chinese commercial banks during 2003-2018, it is found that banks facing lower liquidity risk will be encouraged to take more risk. Moreover, loose monetary policy leads to more aggressive risk-taking by reducing the bank liquidity risk, namely a liquidity risk-taking channel of monetary policy. These findings suggest that authorities should give full consideration to the influence of the monetary policy on bank risk-taking through bank liquidity channels.

Analysis of the Mediating Effect of Economic Policy Uncertainty Affecting Commercial Bank Credit

<p>We analyze the annual microdata of China's 100 commercial banks from 2007 to 2018 using the mediating effect analysis method, analyze the negative impact of economic policy uncertainty on the credit scale of commercial banks, and then verify the intermediary effects of the operational risks and short-term capital liquidity of commercial banks in the impact of economic policy uncertainty on the scale of commercial bank credit, separately. Moreover, we find that non-state-owned commercial banks, large-scale commercial banks, low-leverage commercial banks, and commercial banks with low profitability are more susceptible to economic policy uncertainty affecting commercial bank credit growth through short-term capital liquidity, and vice versa.</p>

GAP Ratio, Posisi Devisa Neto, Biaya Operasional Pendapatan Operasional dan Profitabilitas pada Perbankan di Indonesia

This research intends to examine the factors that influence the profitability of the banking industry since, as a sector that influences economic circumstances, the banking industry has witnessed fluctuations in profitability over the previous decade. This form of study employs quantitative secondary data sources. The population of this research consisted of all state-owned banks from 2010 to 2021. Multiple linear regression test and also hypothesis testing are employed in this study. Using descriptive quantitative statistics, the technique of analysis explains the relationship between the dependent and independent variables. The study's findings give empirical proof that gap ratio and BOPO have a negative impact on ROA. Meanwhile, PDN has no impact on ROA. This study also demonstrates the validity of the theory of asset-liability management (ALMA); maximizing earnings via risk-managing the structure of the business's financial situation and the anticipated income theory; increasing bank liquidity and optimize bank earnings by offering efficient long-term lending.
 Keywords: Gap Ratio; Net Open Position (NOP); Operating Cost of Operating Income (BOPO); Profitability (ROA)

Dating the Lender of Last Resort

Abstract We exploit a fixed rule constraining central bank credit provision in a regression discontinuity framework to analyse counterparties’ behavioural responses to the (non-)receipt of liquidity during a crisis. In spring 1847, the Bank of England suddenly started rationing credit to avoid violating its gold reserve requirement. We show that counterparties that suffered rejection from the Bank were more likely to fail. Conditional on survival, rationed counterparties learned from their experience and changed their behaviour during a subsequent panic in fall 1847: they came to the discount window more often, but submitted smaller requests and relied less on central bank liquidity overall.

Libyan Islamic Banks Experience in Reducing Bank Liquidity from an Islamic

Background: The problem with the study is that the problem of bank liquidity in Libyan Islamic banks is exacerbated by the excess of bank liquidity coverage. (2): Purpose: The study aims to learn about Libyan banks' experience in reducing bank liquidity from an Islamic perspective: Malaysian banks are a model. The study highlights the importance of highlighting Libyan Islamic banks' experience in reducing bank liquidity from the perspective of Islamic Malaysian banks as a model. (3) Method: The study followed a qualitative approach to evaluating internal and external factors, circumstances and variables associated with Libyan Islamic banks' experience in reducing bank liquidity from an Islamic perspective. Individual open interviews were conducted with employees of Libyan Islamic Banks, estimated at 15 employees from Libyan Islamic Banks. Fifteen questions were posed to participants, centered on internal control and its elements on bank liquidity and its components from an Islamic perspective. The study found several findings, (4) Results: including that bank liquidity risk is the risk to banks and may amount to a crisis related to the bank's lack of cash that enables it to fulfil its day-to-day duties to customers. And (5) Conclusion: include an attempt to adopt a peace model and to open the door to short, medium and long-term investments in order to maintain the levels and rates of bank liquidity of Libyan Islamic banks.

PROBLEM SOLVING ANALYSIS OF PEOPLE'S BUSINESS CREDIT FINANCING BASED ON MURABAHAH AGREEMENT AT PT. BANK SYARIAH INDONESIA TBK. MAGELANG SINGOSARI SUB-BRANCH OFFICE

This study aims to determine the resolution of murabahah contract problems related to the factors that influence the micro-financing of the People's Business Credit (KUR) carried out by the financial institution PT Bank Syariah Indonesia Tbk., Magelang Singosari Sub-Branch Office in channeling People's Business Credit (KUR) funds. The method used in this study is descriptive qualitative and data analysis used in this study uses primary and secondary data. The results of the analysis of customer funding of Bank BSI Magelang Singosari Sub-Branch Office are inseparable from the factors and risks. One of them is bad money, which causes a decrease in bank liquidity and affects the reliability of customer savings. In the case of non-performing loans, banks must analyze the factors that affect bank liquidity so as not to cause losses and provide an analysis of bad credit settlement through time relief and installment assistance, especially if the creditor is affected by a disaster, if it is not paid on purpose, it will be confiscated.

The Effect of Macroprudential Policy on Credit Growth and Financing of MSMEs in Indonesia

The global crisis in 2008 had weakened the Financial System Stability (FFS) of almost every country. This financial crisis proved that the country had not been really responsive to global change so the financial system risk management done by the central bank was not able to stabilize the crisis. The formulation of macroprudential policies aims to mitigate the bank behavior in distributing credits and financing to the MSMEs which are pro-cyclical. Macroprudential policy instruments used in this study are Loan to Value (LTV)/ Financing to Value (FTV) and Minimum Statutory Reserves based on Loan to Deposit Ratio (LDR)/ Financing to Deposit Ratio (FDR). In addition, there are also macroeconomic variables and bank liquidity variables. The purpose of this study is to see how the influence of macroprudential policies on credit growth and MSME financing distributed by banks. The research method used is the Vector Error Correction Model (VECM) analysis using time series data from January 2010 to July 2020. The results show that macroprudential policies have not been able to suppress financing and in general the macroeconomic variables and bank liquidity also have an influence on credit and financing.

PEMBIAYAAN UMKM DAN LIKUIDITAS TERHADAP RESIKO PEMBIAYAAN BANK UMUM SYARIAH DI INDONESIA PERIODE 2019-2021

Poor financing quality can affect company profits and revenues, decreased profits have an impact on the ability of banks to channel financing which causes Islamic banking to experience financing risks or problematic financing. This study aims to find out how the independent variables (MSME financing and liquidity) influence the dependent variable (financing risk) of Islamic commercial banks in Indonesia for the 2019-2021 period. The method used in this study is quantitative with descriptive statistics, the classic assumption test, namely the normality test, multicollinearity, autocorrelation, and heteroscedasticity test, is also equipped with hypothesis testing, namely the t (partial) test and f (simultaneous) test. The population used in this study is the statistical financial reports of Islamic commercial banks with samples of MSME, FDR and NPF data for 2019-2021 obtained from the Financial Services Authority. From OJK data, the results show that MSME financing does not have a significant effect on financing risk because there is a guarantee from the government to the community, namely the people's business credit program (KUR) which is channeled through Islamic banking institutions, good and bad bank liquidity does not have an impact on financing risks and financing risks occur because problematic financing from customers is not caused by Islamic banking institutions or liquidity owned by Islamic banking. The conclusion of this study is that the Ho hypothesis is accepted, showing that one or both of the independent variables (MSME financing and liquidity) have no effect on the dependent variable (financing risk) of Islamic general banks in Indonesia for the 2019-2021 period.

The Influence of Bank Liquidity on Lending Behaviour of Deposit Money Banks (DMBs) in Nigeria (2006 - 2020)

The relevance of DMBs and their lending activities in Nigeria necessitates concern about the liquidity condition of these banks. This is particularly pertinent, given the spate of recurring unpalatable incidences in the Nigerian banking sub-sector even after the 2005 consolidation. The objective of the study was to examine the influence of bank liquidity on lending behaviour of DMBs in Nigeria. Twelve (12) listed DMBs were selected using the convenience sampling technique. The ex post facto research design was adopted and secondary data drawn from the sampled DMBs from 2006 to 2020 were used for analysis. The data were analyzed using descriptive statistics and regression analysis. The results revealed that bank liquidity significantly influences lending behaviour of DMBs. However, the loan to total assets ratio was found to exert the highest relative influence on lending behaviour of DMBs. It was therefore recommended that DMBs should prioritize the maintenance of a dynamic loan to total assets ratio. Also the Central Bank of Nigeria and other regulatory bodies should be more proactive in ensuring DMBs’ liquidity and sustainability.

Environmental reputation and bank liquidity: Evidence from climate transition

AbstractThis study empirically investigates how a bank's nonfinancial signals of environmental reputation affect its deposits and credit provision in US counties with severe climate transition risks. We find that banks with higher reputational risks associated with environmental issues tend to experience declining deposits in counties exposed to severe climate change risks. Banks with a poor environmental reputation also reduce mortgage origination in such counties and diminish liquidity creation if they have high deposit shares in counties sensitive to climate transition. This study suggests that a bank's reputation regarding environmental, social and governance practices is an important underlying cause of bank liquidity in areas sensitive to climate change.

ANALISIS MAQASHID SYARI’AH PADA KEBIJAKAN RESTRUKTURISASI DALAM MENGATASI PEMBIAYAAN BERMASALAH AKIBAT PANDEMI COVID 19 (STUDI KASUS BANK BTN SYARIAH MEDAN)

<p><strong>Abstract<br /> </strong><em>The provision of financing in Islamic banks always carries the risk of payment difficulties that occur in Islamic banks the same as conventional banks, causing financing problems. To overcome this problem, Islamic banking applies the same thing as conventional banks, namely financing restructuring in overcoming problem financing. In this study, the problem that occurred was the COVID-19 pandemic which caused the business and business sectors to experience market problems due to government regulations to keep themselves at home. So the bank, in this case Islamic banking, took action to answer the problem of non-performing financing by restructuring to save banking liquidity and also the finances of customers who had difficulty paying due to the covid 19 pandemic. This study used a qualitative approach using the Publish and Perish software tool to collect journal articles relevant to the purpose of this study. The collected articles were analyzed for content (content analysis) and analyzed with the maqashid shari'ah theory to see the suitability of saving problematic financing for customers and banks during the covid 19 period to achieve benefit for both. The findings in this study are that in improving the performance of banks in carrying out non-performing financing, banks must analyze social problems that occur to find solutions due to the Covid 19 Pandemic which causes economic problems that result in problematic financing</em>.</p><p> </p><p>Keyword : <em>maqashid shari'ah, restructuring, non-performing financing</em></p>

Impacts of Bank Specific and Macroeconomic Determinants on Bank Liquidity: Empirical Evidence from Bangladesh.

This study endeavors to determine the determinants that have an influence on bank liquidity over the tenure from 2008 to 2018. To achieve this purpose, some internal and external factors are identified and divided into bank-specific and macroeconomic determinants, respectively. Bank liquidity is measured as a function of bank-specific and macroeconomic factors using prominent liquidity indicators such as current ratio. Using multiple regression analysis, the results show that return on assets, non-performing loan, debt to assets ratio, and capital adequacy ratio have a significant impact on bank liquidity. However, macroeconomic factors such as annual gross domestic product growth rate, annual inflation rate, and annual unemployment rate have no significant impact separately on bank liquidity, but they have a unified impact on bank liquidity as they are non-diversified factors. So, the bank management body should concern mostly with internal determinants than external factors to maintain liquidity balance. Because internal factors are controllable but macroeconomic factors are equally influential for every banking institution and, they are non-diversifiable in nature. So, the results suggest that concern return on assets, non-performing loan, debt to asset ratio, and capital adequacy ratio will help improve liquidity management.

Does Kyrgyz banking system liquidity provide economic growth?

The relationship between the liquidity ratio, the economy and the banking system of a country is a popular subject among academics. This research aims to understand this connection for Kyrgyzstan, a developing economy. The Vector Auto Regression approach was used to trace the association of liquidity ratio to loan and deposit volumes, interest income, net interest income, treasury bill volume, and gross domestic product based on the quarterly data. The data was obtained from various publications of the National Bank of the Kyrgyz Republic. The primary literature indicates that bank liquidity has an inverse correlation not only with bank profitability but also with economic growth. The findings confirm a similar relationship for Kyrgyzstan. Furthermore, liquidity has a positive relationship to treasury bills volume, but a negative correlation to economic growth. However, there was no significant correlation between the liquidity ratio and deposit volumes. Therefore, this paper found that high liquidity ratio of the Kyrgyz banking system negatively effects both the profitability of the banks and economic growth.

Bank liquidity and capital shocks in unconventional times

This paper examines bank liquidity management following capital shocks under capital and liquidity regulation in a period of unconventional monetary policies. Studying European banks between 2010 and 2018, we find that bank liquidity is generally not affected by a negative capital shock. Capital shocks are nevertheless transmitted into liquidity positions through balance sheet adjustments. Addressing bank-level balance sheet policies, we find that the banks de-risk assets by replacing corporate loans with financial securities, especially if the shock takes place during periods of heightened central bank interventions. Moreover, asset-side-dominant risk-reducing behavior goes against regulatory intent and indicates that regulatory arbitrage considerations affect banks’ responses to shocks. Finally, we document heterogeneous responses by banks depending on their size, type, and country. These findings imply that compliance with regulation may lead to partial shortages in corporate lending, with banks prioritizing investment in government securities in event of a capital shock.