Management Strategies for Bank¡¯s Liquidity Risk

Sviatlana Hlebik and Lara Ghillani

International Journal of Economics and Finance, 2017, vol. 9, issue 6, 98-110

Abstract: Liquidity risk management is today a major focus for regulators, due to increasing complexity of financial markets and concerns related to inadequate identification and managing liquidity risk, exacerbated by the financial crisis. Because the financial market is increasingly interconnected, a liquidity shortfall at a single institution can have system-wide consequences. This paper aims to provide analytical explanations of how important decisions made by bank managers can influence the capability of an institution to finance increases in assets and meet their commitments without impairing cash flow. Banks are particularly susceptible to liquidity risk because the maturity transformation from short-term deposits into long-term loans is one of their key business activity. Further, there can be uncertainties in cash-flow in the external occurrences and agents' behavior. Skillful liquidity risk management is essential, and the present work analyses impact of some management strategies on Basel III liquidity ratios.

Keywords: banks; Basel III; liquidity risk; banking regulation (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:6:p:98-110

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