Part V Liquidity and Leverage, 21 Liquidity Requirements

2018 ◽  
Author(s):  
Gleeson Simon
Keyword(s):  
Risk Management ◽  
Liquidity Risk ◽  
Basel Iii ◽  
Liquidity Management ◽  
Coverage Ratio ◽  
Risk Monitoring ◽  
Monitoring Tools ◽  
Basel 3 ◽  
Liquidity Regulation

This chapter discusses liquidity requirements under Basel 3. The basis of all liquidity regulation remains the BCBS principles for sound liquidity management, which provide detailed guidance on the risk management of liquidity and are intended to promote better risk management in this area. These are supplemented by the liquidity monitoring tools set out in the BCBS paper Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools. There is also a move away from modelling and towards a less flexible, less risk-based architecture which prioritises comparability and even-handedness over accuracy and effectiveness. Moreover, supervisors are mandated to operate a comprehensive programme of liquidity supervision over and above the mechanical requirements.

scholarly journals Liquidity risk management: practice among Croatian firms

2018 ◽  
Vol 6 (1) ◽  
pp. 81-97
Author(s):  
Goran Karanović ◽  
Bisera Karanović ◽  
Martina Gnjidić
Keyword(s):  
Risk Management ◽  
Risk Measures ◽  
Management Practice ◽  
Liquidity Risk ◽  
Financial Knowledge ◽  
Financial Indicators ◽  
Liquidity Management ◽  
Management Measures ◽  
Management Plans ◽  
Business Entities

The main purpose of this paper is to explore the practice of liquidity risk management of Croatian business entities. The analysis is based on a survey of 62 business entities in Croatia. The authors investigate the existence of risk management and liquidity risk management measures among the surveyed business entities. The respondents’ knowledge of management, their use of indicators and methods for the management of liquidity risk, in addition to the cited reasons for implementation of liquidity risk measures were also subject to examination. Furthermore, the authors investigate the importance of liquidity management in business. The analysis reveals that Croatian business entities have neither sufficient knowledge regarding the majority of financial indicators, nor they tend to use liquidity management plans. Consequently, the survey’s findings indicate that the overall level of financial knowledge of Croatian managers is inadequate. This can, thus, be identified as one of the reasons for the traditionally high number of illiquid business entities in the market. Finally, this paper provides academia and policymakers with new revelations concerning the management of liquidity risk among business entities in Croatia.

scholarly journals Relationship Between Risk Management Practices and Investment Decisions in Bank of Kigali, Rwanda

2020 ◽  
Vol 1 (1) ◽  
pp. 88-107
Author(s):  
Gedion Alang’o Omwono ◽  
Kayumba Annette
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Best Practice ◽  
Management Practices ◽  
Investment Decisions ◽  
Liquidity Risk ◽  
Market Risk ◽  
Risk Tolerance ◽  
Credit Risk Management ◽  
Risk Monitoring

The purpose of this study was to examine the relationship between risk management practices and investment decisions in Bank of Kigali, Rwanda. This study adopted correlational research design. Descriptive statistics include those of the mean, standard deviation and frequency distribution while inferential statistics involves use of spearman’s coefficient correlations. Linear regression was used where ANOVA was carried on each variable. The study found that there was a correlation between liquidity risk management, default risk management and market risk management with performance of the Banks. The study findings indicated that credit risk management (r=0.096, p<0.01), liquidity risk management (r=0.347, p<0.01), market risk management (r=0.506, p<0.01) and operational risk management (r=0.612, p<0.01) on financial performance. It however found that the Banks do not involve experts and consultants in market risk management thus recommendations were made for the Banks to revise their credit risk management policies, open up and share information with other players on market risk thus involve consultants more in their market risk management and to be more proactive than reactive in risk management. The study concluded that, risk management has a positive influence on the investment decisions and that risk monitoring can be used to make sure that risk management practices are in line with proper best practice risk monitoring policies which also helps bank management to discover exposures at early stages and make corrective actions. The study recommended that, Senior management should develop strategies, policies and practices to manage risk in accordance with the Banks risk tolerance and to ensure that the bank maintains sufficient liquidity risk cover.

scholarly journals A SUCCINCT ANALYSIS OF MITIGATING LIQUIDITY RISK IN ISLAMIC BANKS IN THE LIGHT OF LIQUIDITY AND RISK MANAGEMENT PRINCIPLES

2019 ◽  
Vol 4 (1) ◽  
pp. 527
Author(s):  
Atharyanshah Puneri ◽  
Naeem Suleman Dhiraj ◽  
Hafiz Benraheem
Keyword(s):  
Risk Management ◽  
Financial Institutions ◽  
Financial Institution ◽  
Real Life ◽  
Liquidity Risk ◽  
Islamic Banks ◽  
Liquidity Management ◽  
Islamic Financial Institutions ◽  
The Subject ◽  
Key Aspects

Liquidity management has been incessantly challenging for the financialinstitutions and especially Islamic financial institutions due to their nature of business. The�convoluted nature of liquidity management impedes the task of Islamic banks in managing�their liquidity efficiently. Given the intricacies of the subject matter, this paper delves into�elaborating the key aspects of liquidity management; subsequently, discusses the�consequences of poor liquidity management and problems inherent in managing the latter by�analyzing the real-life failure of Islamic financial institution as a result identifying the issues that could possibly jeopardize the existence of the Islamic banks. Finally, equipping the�readers with tools to mitigate the liquidity risk.

THE USE OF LIQUIDING AS A BANK MANAGEMENT CATEGORY

2021 ◽  
pp. 61-64
Author(s):  
Y. V. Rozhkov
Keyword(s):  
Risk Management ◽  
Liquidity Risk ◽  
Liquidity Management ◽  
Bank Management ◽  
Credit Institutions

The article describes the theoretical problems related to the use of «bank liquidity» category. «Function» category is revealed in relation to the liquidity of credit institutions. It is proposed to introduce «liquiding» category into scientific and practical circulation as a quintessence that combines the concepts of «liquidity», «liquidity management», «liquidity risk management»

scholarly journals Basel III Liquidity Risk Measures and Bank Failure

2013 ◽  
Vol 2013 ◽  
pp. 1-19 ◽  
Author(s):  
L. N. P. Hlatshwayo ◽  
M. A. Petersen ◽  
J. Mukuddem-Petersen ◽  
C. Meniago
Keyword(s):  
Risk Measures ◽  
Liquidity Risk ◽  
Banking Regulation ◽  
Global Scale ◽  
Basel Ii ◽  
Bank Failure ◽  
Bank Failures ◽  
Basel Iii ◽  
Coverage Ratio ◽  
Discrete Time Hazard Model

Basel III banking regulation emphasizes the use of liquidity coverage and nett stable funding ratios as measures of liquidity risk. In this paper, we approximate these measures by using global liquidity data for 391 hand-selected, LIBOR-based, Basel II compliant banks in 36 countries for the period 2002 to 2012. In particular, we compare the risk sensitivity of the aforementioned Basel III liquidity risk measures to those of traditional measures such as the nonperforming assets ratio, return-on-assets, LIBOR-OISS, Basel II Tier 1 capital ratio, government securities ratio, and brokered deposits ratio. Furthermore, we use a discrete-time hazard model to study bank failure. In this regard, we find that Basel III risk measures have limited ability to predict bank failure when compared with their traditional counterparts. An important result is that a higher liquidity coverage ratio is associated with a higher bank failure rate. We also find that market-wide liquidity risk (proxied by LIBOR-OISS) was the major predictor of bank failures in 2009 and 2010 while idiosyncratic liquidity risk (proxied by other liquidity risk measures) was less. In particular, our contribution is the first to achieve these results on a global scale over a relatively long period for a variety of banks.

scholarly journals The relationship between liquidity risk and probability of default: Evidence from the Euro area

2013 ◽  
Vol 3 (1) ◽  
pp. 42-50 ◽  
Author(s):  
Doriana Cucinelli
Keyword(s):  
Panel Data ◽  
Euro Area ◽  
Time Horizon ◽  
Credit Rating ◽  
Liquidity Risk ◽  
Probability Of Default ◽  
Liquidity Management ◽  
Coverage Ratio ◽  
Short Time ◽  
The Relationship

The main objective of this study is to analyze the type of relationship that exists between liquidity risk - measured with the liquidity coverage ratio and the net stable funding ratio - and the probability of default. The sample is composed of 575 listed and non-listed Eurozone banks and the methodology applied in the analysis is OLS regression based on panel data. The results show a relationship only between the liquidity coverage ratio and credit rating, while there is no relationship between the longterm liquidity measure and probability of default. In relation to the crisis, the results highlight divergent bank liquidity management only in the short time horizon.

scholarly journals Theoretical aspects of liquidity management in a commercial bank

2020 ◽  
pp. 61-69
Author(s):  
S. V. Solonina
Keyword(s):  
Risk Management ◽  
Organizational Structure ◽  
Commercial Bank ◽  
Management System ◽  
Liquidity Risk ◽  
General System ◽  
Point Of View ◽  
Credit Institution ◽  
Management Tools ◽  
Liquidity Management

The study presents various approaches to the interpretation of the concept of liquidity of a credit institution and its essence. Differences are highlighted that reflect the priority aspects in assessing the liquidity of a commercial Bank from the authors ‘ point of view. The Bank of Russia’s liquidity ratios and ratios are also presented. The research resulted in a change in the Bank’s structure, since the most important element of the formation of a commercial Bank’s liquidity management system is the improvement of the organizational structure responsible for forecasting liquidity and selecting management tools. When improving such a structure, it should be ensured that the structure is integrated into the unified management system of a commercial Bank, that it is linked to other structural divisions of the Bank, and that it has a comprehensive approach to managing liquidity risk, along with other risks. It is concluded that the most effective model is the creation of a single risk management Department, which includes a liquidity management Committee. At the same time, all structural divisions of the Bank should be included in the General system. The recommendation to evaluate the obligations taking into account the possibility of their early repayment is justified.There is no conflict of interests.

scholarly journals Risk management practices in Egypt: A comparison study between Islamic and Conventional banks

2015 ◽  
Vol 5 (4) ◽  
pp. 257-270 ◽  
Author(s):  
Hassan M. Hafez
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Management Practices ◽  
Liquidity Risk ◽  
Risk Identification ◽  
Islamic Banks ◽  
Comparison Study ◽  
Risk Monitoring ◽  
Conventional Banks ◽  
Risk Assessment And Analysis

The purpose of this research is to examine the degree to which the Egyptian banks use risk management practices and techniques to eliminate associated risks to their business. Not only has that but also to compare between Islamic and conventional banked in terms of risk management practices. A standardized questionnaire was used to cover the main aspects of risk management: understanding risk, risk management, risk identification, risk assessment and analysis; risk monitoring and risk management practices and finally the types of risks faced by the two set of banks. The study found that the most challenging types of risks facing Islamic and conventional banks in Egypt are credit and liquidity risks. Conventional banks are more efficient in risk management and use more sophisticated techniques and practices. Liquidity risk is the most prominent and vital risk for Islamic Banks.

scholarly journals BASEL III LIQUIDITY RISK AND KOSOVO BANKING SYSTEM

2019 ◽  
Vol 34 (5) ◽  
pp. 1329-1335
Author(s):  
Hysen Lajqi
Keyword(s):  
European Union ◽  
Banking Sector ◽  
Financial System ◽  
Liquidity Risk ◽  
Capital Requirements ◽  
Basel Iii ◽  
Bank Capital ◽  
The European Union ◽  
Coverage Ratio ◽  
Basel Committee

The financial crisis 2007-2009 prompted the Basel Committee on Banking Supervision (BCBS) to intensify its efforts to strengthen the principles and standards for capital, as well as for the measurement and management of liquidity risk. Risk management is very important in the financial system, especially in banks. Among various risks Banks face is a liquidity risk it’s managing enables Banks to fulfil their obligationsBasel III consists of set of measures internally agreed. The implementation of Basel III will considerably increase the quality of banks' capital and significantly raise the required level of their capital. In addition, it will provide a "macro prudential overlay" to better deal with systemic risk.Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.To ensure that banks have sufficient liquidity to survive potential liquidity shocks, as happened few years ago, the Basel Committee has issued two new globally revised minimum standards under the Basel III rules for the first time in the banking history: LCR – Liquidity Coverage Ratio and NSFR – Net Stable Funding Ratio that contain new requirements for bank capital, as well as standardized rules in the liquidity area.Banks need to fully comply with LCR and NSFR rules by January 1, 2019, according to the Capital Requirements Directive & Capital Requirements Regulation (CRD IV & CRR) rules.Basel III rules, in the European Union attain their applicable judicial form through REGULATION (EU) No 575/2013. The regulatory package is due to enter into force on January 1st, 2014, but some provisions will be implemented gradually between 2014 and 2019 and will fully come into force on January 1st, 2019. But these rules are likely to undergo some revisions due to a proposal by European Union (EU), so implementation horizon could go being beyond 2019.Performance of the Kosovo banking sector continued to be positive, thus contributing in maintaining the financial and economic stability of the country. Kosovo’s financial system continues to be characterized with sustainable increase in all its constituent sectors. The banking sector in Kosovo as most successful story is developed by many international institutions, characterized by a large presence of foreign capital, where 89. 2% of all assets are managed by foreign banks and development is based on international standards.Banking sector continued to have good liquidity position, with the main liquidity indicators standing above the minimal level as a required by the regulation.The implementation of Basel III rules in Kosovo related to liquidity depends on the local regulator and Basel III standards.

Sign in / Sign up

Export Citation Format

Share Document