LIQUIDITY RISK EXPOSURE FOR SPECIALIZED AND UNSPECIALIZED REAL ESTATE BANKS: EVIDENCES FROM THE ITALIAN MARKET

Lucia Gibilaro, Claudio Giannotti and Gianluca Mattarocci

ERES from European Real Estate Society (ERES)

Abstract: Liquidity is the ability of a bank to collect money necessary for financing assets and meet obligations as they come due, without incurring unsustainable losses; the maturity transformation of short-term deposits into long-term loans makes banks inherently vulnerable to liquidity risk (Basel Committee on Banking Supervision, 2008). As banks specialized on real estate finance show an average high duration of the assets (Booth, 2002), liquidity risk is extremely relevant to ensure the stability of the financial intermediary. Under an asset and liabilities management approach (ALM), the paper is aimed to analyze the impact of the maturities structure on the liquidity position, discriminating between residential property specialized lenders and others. Yearly and half-yearly balance sheet data are collected from the ABI Banking Data database over the period 2000-2008. Data attain the individual balance sheet and all consolidated balance sheets are excluded from the analysis. In order to construct a sample that is representative of the Italian market, all banks available in each semester are selected independently from number of semesters for which the data are available The asset / liability structure analysis considers the banking book of each bank and computes, for each semester, measures of the liquidity risk exposure as: contractual maturity mismatch (Drago, 2003); concentration on funding (Matz and Neu, 2007); available unencumbered assets (Resti and Sironi, 2007). The sample is classified on the basis of the percentage of residential loan exposures on the total assets using a threshold the 40% per cent (Eisenbeis and Kwast, 1991). Total active banks are stratified in three groups according to the number of years in which they could be classified as specialized real estate banks (Blasko and Sinkey, 2006). A comparison of ALM measures for different subsamples is released in order to evaluate if the choice to specialize in the real estate sector affect the exposure at risk of the bank Results obtained will show that misalignment between asset and liability structure affects the liquidity position of the bank. The borrowerís business sector and characteristics affect the bankís liquidity risk exposure. Banks that are structurally more exposed are those that are specialized in the real estate sectors. Empirical evidence provided demonstrates that the current debate on the need to define asset/liability maturity regulatory constraints could have relevant implication for the Italian banking sector, especially for the banks involved in the property market.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2010-01-01
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Citations: View citations in EconPapers (3)

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