Prudential Liquidity Regulation in Developing Countries: A Case Study of Rwanda

Sarah Sanya, A. E. Wayne Mitchell and Angelique Kantengwa

No 2012/020, IMF Working Papers from International Monetary Fund

Abstract: This paper analyses the prudential liquidity management framework, in particular the quantitative indicators employed by the central bank of Rwanda in response to the domestic liquidity crisis in 2008/09. It emphasises that the quantitative methods used in the monitoring and assessment of systemic liquidity risk are inadequate because they did not signal the liquidity crises ex-post. There are quick gains to be made from augumenting the liquidity risk indicators with more dynamic liquidity stress tests so that compliance will be achieved through lengthening the maturities of both assets and liabilities on the balance sheet as opposed to simply holding more liquid assets. The paper recommends that policy emphasis shift toward reforms that strengthen systemic liquidity risk assesment, monetary policy implementation as well as improve the efficiency of Rwanda's financial system.

Keywords: WP; bank; banking system; liquid asset; liquidity crisis; Liquidity risk; Rwanda; regulation; supervsion; stress testing; excess reserves; cash flow; balance sheet maturity gap analysis; liquidity management framework; liquidity stress tests; lender-of last-resort facilities; banking system to liquidity shock; current liabilities; market liquidity condition; liquidity regulation framework; liquidity risk metrics; NBR's balance sheet maturity gap analysis; Liquidity; Liquidity management; Commercial banks; Liquidity stress testing; Global (search for similar items in EconPapers)
Pages: 30
Date: 2012-01-01
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Citations: View citations in EconPapers (2)

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