Early Warning Indicators: Banking Liquidity Risk

Ndari Suryaningsih (), Diana Yumanita () and Elis Deriantino ()
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Ndari Suryaningsih: Bank Indonesia
Diana Yumanita: Bank Indonesia
Elis Deriantino: Bank Indonesia
Authors registered in the RePEc Author Service: Elis Deriantino Naiborhu

No WP/1/2014, Working Papers from Bank Indonesia

Abstract: This study is aimed at developing early warning indicators (EWI) for banking liquidity risk. The banking liquidity risk indicators are selected based on the source of the risk, i.e. funding liquidity risk, market liquidity risk, and risk in the payments system, especially risks related to real time gross settlement (RTGS). The indicators which are selected as EWI must be able to predict the liquidity stress event in Q4 2008 as well as minimize statistical error. The statistical evaluation results show that indicators of funding liquidity risk which include the loan to deposit ratio (LDR), the funding gap, the inverse net stable funding ratio (adjusted), and the ratio of liquidity creation in the form of an annual change along with the short term liquidity ration can give a signal one year before the stress event of 2008, meaning that these indicators can become EWI of banking liquidity risk.

Keywords: early warning indicator; banking liquidity risk (search for similar items in EconPapers)
JEL-codes: C15 G21 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2014-12
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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http://publication-bi.org/repec/idn/wpaper/WP012014.pdf First version, 2014 (application/pdf)

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