Net stable funding ratio and profit efficiency of commercial banks in the US

Minh Le, Viet-Ngu Hoang, Clevo Wilson () and Shunsuke Managi

Economic Analysis and Policy, 2020, vol. 67, issue C, 55-66

Abstract: The net stable funding ratio (NSFR) was introduced under the Basel III accord to promote financial stability. Under this new international regulation, individual financial institutions are required to maintain a sustainable funding structure. Hence this new universal requirement is expected to materially affect bank operations. In this paper, we provide one of the first empirical examinations of the non-linear impact of the NSFR on profit (in)efficiency for commercial banks using two data sets from Bankscope (from 2000 to 2015) and the Federal Financial Institutions Examination Council call reports (between 2000–2013). Our results suggest that modest intensification in liquidity helps to reduce bank profit inefficiency (i.e. increase efficiency) but a too greater liquidity enlargement could increase inefficiency. This result is consistent with the trade-off hypothesis based on an assumption of a non-linear relationship between liquidity and bank performance

Keywords: NSFR; Liquidity; Profit inefficiency (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592619304801
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Net stable funding ratio and profit efficiency of commercial banks in the US (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:67:y:2020:i:c:p:55-66

DOI: 10.1016/j.eap.2020.05.008

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().