Journal articles: 'Liquidity funding risk'

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Zhang, Dewei, Chongfeng Wu, and Chunyang Zhou. "Optimal liquidity reserve with funding liquidity risk." Applied Economics Letters 20, no. 16 (November 2013): 1449–52. http://dx.doi.org/10.1080/13504851.2013.826860.

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Dahir, Ahmed Mohamed, Fauziah Binti Mahat, and Noor Azman Bin Ali. "Funding liquidity risk and bank risk-taking in BRICS countries." International Journal of Emerging Markets 13, no. 1 (January 15, 2018): 231–48. http://dx.doi.org/10.1108/ijoem-03-2017-0086.

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Purpose The purpose of this paper is to examine the effects of funding liquidity risk and liquidity risk on the bank risk-taking. Design/methodology/approach This study employs a system generalized method of moments (GMM) estimation technique and a sample of 57 banks operating in BRICS countries over the period from 2006 to 2015. Findings The results reveal that liquidity risk has a significant and negative effect on the bank risk-taking, indicating that a decrease in liquidity risk contributes to higher bank risk-taking. The study also reveals that funding liquidity risk has the substantial impact on bank risk-taking, suggesting lower funding liquidity risk results in higher bank risk-taking. These results are consistent with prior assumptions. Research limitations/implications The implications of this study highlight the fact that liquidity risk is a risk factor which drives the potential bank default, of which banks tend to take more risks when higher funding liquidity exists. Practical implications This study offers a number of valuable implications for the policy makers as well as practitioners. The policy makers should take into account better liquidity risk management framework aimed at preventing banks from taking excessive risks. Bank executives must pay more attention on how banks could hold more liquid securities and cash. Less risk-taking reduces higher borrowing costs undermining earnings through imposing taxes on corporate. Originality/value This work uncovered that liquidity risk per se is an important and previously unidentified risk factor, specifically its effects on bank risk-taking and contributes to the view in support of holding more liquid securities than the past.

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Chen, Wei, and Jimmy Skoglund. "Optimal hedging of funding liquidity risk." Journal of Risk 16, no. 3 (February 2014): 85–111. http://dx.doi.org/10.21314/jor.2014.292.

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Petersen, M. A., B. De Waal, J. Mukuddem-Petersen, and M. P. Mulaudzi. "Subprime mortgage funding and liquidity risk." Quantitative Finance 14, no. 3 (January 10, 2012): 545–55. http://dx.doi.org/10.1080/14697688.2011.637076.

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Drehmann, Mathias, and Kleopatra Nikolaou. "Funding liquidity risk: Definition and measurement." Journal of Banking & Finance 37, no. 7 (July 2013): 2173–82. http://dx.doi.org/10.1016/j.jbankfin.2012.01.002.

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Khan, Muhammad Saifuddin, Harald Scheule, and Eliza Wu. "Funding liquidity and bank risk taking." Journal of Banking & Finance 82 (September 2017): 203–16. http://dx.doi.org/10.1016/j.jbankfin.2016.09.005.

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Abbas, Faisal, Shoaib Ali, Imran Yousaf, and Wing-Keung Wong. "Dynamics of Funding Liquidity and Risk-Taking: Evidence from Commercial Banks." Journal of Risk and Financial Management 14, no. 6 (June 21, 2021): 281. http://dx.doi.org/10.3390/jrfm14060281.

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The purpose of this study is to investigate the impact of funding liquidity risk on the banks’ risk-taking behavior. To test the hypotheses, we apply the two-step system GMM technique on US commercial banks data from 2002 to 2018. We find that funding liquidity increases the banks’ risk-taking of US commercial banks. Furthermore, banks with higher deposits are less likely to face a funding shortage, and bank managers’ aggressive risk-taking activity is less likely to be monitored. Our findings infer that increases in bank funding liquidity increase both risk-weighted assets and liquidity creation, and deposit insurance creates a moral risk issue for banks taking excessive risks in response to deposit rises. The relationship between funding liquidity and the banks’ risk-taking varies with their capitalization and market conditions; the impact of funding liquidity on risk-taking is pronounced for well-capitalized banks and the Global Financial Crisis 2007. Our tests are robust for the usage of alternate proxy of funding liquidity and by controlling economic conditions. The findings of this study have implications for regulators to develop guidelines for the level of liquidity and risk-taking of commercial banks.

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Chen, Yi-Kai, Chung-Hua Shen, Lanfeng Kao, and Chuan-Yi Yeh. "Bank Liquidity Risk and Performance." Review of Pacific Basin Financial Markets and Policies 21, no. 01 (January 18, 2018): 1850007. http://dx.doi.org/10.1142/s0219091518500078.

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This study employs an alternative measure of liquidity risk to investigate its determinants by using an unbalanced panel dataset of commercial banks in 12 advanced economies over the period 1994–2006. Dependence on liquid assets for external funding, supervisory and regulatory factors, and macroeconomic factors are all determinants of liquidity risk. Because of higher funding costs for obtaining liquidity, liquidity risk is regarded as a discount for bank profitability, yet liquidity risk shows a premium on bank performance in terms of banks’ net interest margins. Liquidity risk has reverse impacts on bank performance in a market-based financial system.

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Schmitt, Eugenia. "Liquidity Gap Report for Stress Testing Structural Liquidity Risk." GIS Business 12, no. 6 (December 18, 2017): 43–53. http://dx.doi.org/10.26643/gis.v12i6.3313.

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The need to focus on banks funding structure and stress testing in an explicit way arose as a consequence of the crisis of past decades. Liquidity risks usually occur as a consequence of other kinds of risks, hence analysing scenarios in a prospective manner is essential for the assessment if the bank can fulfill its obligations as they come due and if its funding costs are appropriate. The structural liquidity risk and the degree of the liquidity mismatch can be measured based on the liquidity gap analysis, where expected cash-in- and outflows, divided in different time-buckets are depicted. The liquidity gap report (LGR) shows if a liquidity shortcoming appears in the future and how high is the amount a bank would have to pay, if any hedging were not possible. This paper shows how to build a comprehensive LGR which is the base for both, liquidity and wealth risk evaluation. To improve the accuracy of the forecast, the counterbalancing capacity will be incorporated into the LGR. This tool is a methodological basis for quantitative and qualitative risk assessment and stress testing.

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Dang, Van Dan. "The Basel III net stable funding ratio and a risk-return tradeoff: Bank-level evidence from Vietnam." Asian Academy of Management Journal of Accounting and Finance 17, no. 2 (December 10, 2021): 247–74. http://dx.doi.org/10.21315/aamjaf2021.17.2.10.

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The Net Stable Funding Ratio (NSFR) liquidity rule under Basel III guidelines is designed to handle long-term liquidity risk, promoting the sustainable structures of bank funding. This study estimates the NSFR and analyses the impact of this liquidity ratio on banks according to a risk-return trade-off in Vietnam prior to the Basel III implementation. Using yearly data for commercial banks from 2007 to 2018, I find that banks with higher NSFR gain more potential benefits than banks with lower NSFR. Concretely, a rise in NSFR increases bank profitability and decreases bank funding costs, credit risks and liquidity creation, as evidenced by a comprehensive set of alternative measures. The findings of this study offer insightful implications on the bank policy framework advocating the Basel III liquidity regulation in Vietnam as well as other emerging markets.

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NAUTA, BERT-JAN. "LIQUIDITY RISK, INSTEAD OF FUNDING COSTS, LEADS TO A VALUATION ADJUSTMENT FOR DERIVATIVES AND OTHER ASSETS." International Journal of Theoretical and Applied Finance 18, no. 02 (March 2015): 1550014. http://dx.doi.org/10.1142/s0219024915500144.

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Traditionally derivatives have been valued in isolation. The balance sheet of which a derivative position is part, was not included in the valuation. Recently however, aspects of the valuation have been revised to incorporate certain elements of the balance sheet. Examples are the debt valuation adjustment which incorporates default risk of the bank holding the derivative, and the funding valuation adjustment that some authors have proposed to include the cost of funding into the valuation. This paper investigates the valuation of derivatives as part of a balance sheet. In particular, the paper considers funding costs, default risk and liquidity risk. A valuation framework is developed under the elastic funding assumption. This assumption states that funding costs reflect the quality of the assets, and any change in asset composition is immediately reflected in the funding costs. The result is that funding costs should not affect the value of derivatives. Furthermore, a new model for pricing liquidity risk is described. The paper highlights that the liquidity spread, used for discounting cashflows of illiquid assets, should be expressed in terms of the liquidation value (LV) of the asset, and the probability that the institution holding the asset needs to liquidate its assets.

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Chen, Zhuo, and Andrea Lu. "A Market-Based Funding Liquidity Measure." Review of Asset Pricing Studies 9, no. 2 (September 10, 2018): 356–93. http://dx.doi.org/10.1093/rapstu/ray007.

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AbstractWe construct a traded funding liquidity measure from stock returns. Guided by a model, we extract the measure as the return spread between two beta-neutral portfolios constructed using stocks with high and low margins, to control for their sensitivity to the aggregate funding shocks. Our measure of funding liquidity is correlated with other funding liquidity proxies. It delivers a positive risk premium that cannot be explained by existing risk factors. A model augmented by our funding liquidity measure has superior pricing performance for various portfolios. Despite evident comovement, this measure contains additional information that is not subsumed by market liquidity.Received March 29, 2017; accepted August 8, 2018 by Editor Wayne Ferson.

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Dang, Van, and Hoang Nguyen. "Uncertainty and bank funding liquidity risk in Vietnam." Ekonomski anali 67, no. 234 (2022): 29–54. http://dx.doi.org/10.2298/eka2234029d.

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This paper examines the impact of uncertainty on bank funding liquidity risk. Based on a sample of Vietnamese commercial banks from 2007 to 2019, we show evidence that micro uncertainty in the banking sector leads to higher funding liquidity risk, as proxied by lower deposit ratios. Additional analyses reveal that this nexus widely depends on bank heterogeneity. More precisely, various bank-specific forces that improve banks? financial strength (i.e., an increase in bank return, loan quality, capitalization, liquid assets, and bank size) tend to mitigate the adverse impact of uncertainty on bank funding liquidity risk. Our findings are robust to changes in multiple combinations of regressors, different key bank-level variables to calculate the dispersion of shocks as banking uncertainty measures, and alternative econometric approaches.

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SIDDIQUI, ASIF IQBAL, and DORA MARINOVA. "FUNDING LIQUIDITY RISK, SYNDICATION BEHAVIOR AND THE RISK CULTURE OF THE AUSTRALIAN VENTURE CAPITAL INDUSTRY." Singapore Economic Review 64, no. 05 (December 21, 2016): 1279–97. http://dx.doi.org/10.1142/s0217590816500405.

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Venture capital (VC) is usually invested in high risk technology companies at their early stages of development. In response to the industry risk environment, the VC fund managers have developed a set of risk management practices appropriate for the industry which include investment syndication. Furthermore, the VC funds are supplied by individual and institutional investors with different risk profiles and investment focus, usually in finite amounts and for a limited period of time. The funding agreement between the VC firms and the fund investors combined with the limited amount and time can lead to additional funding liquidity risks as the VC funds are invested in the portfolio companies. In this paper, we develop a simple two period model from a VC firm’s perspective with funding liquidity constraints to demonstrate how funding liquidity risk can influence syndication decisions. We subsequently analyze the implication of the model, derive a set of predictions and validate them with VC investment data from Australia. The analysis shows that syndication has both instrumental function in risk management and behavioral implications on risk culture essential for addressing the emerging frontiers of sustainability risks.

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Alzoubi, Tariq. "Determinants of liquidity risk in Islamic banks." Banks and Bank Systems 12, no. 3 (September 7, 2017): 142–48. http://dx.doi.org/10.21511/bbs.12(3).2017.10.

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This research analyzes the determinants of liquidity risk in Islamic banks by using a comprehensive model that incorporates several variables that impact the liquidity of Islamic banks. A panel data analysis is conducted on a sample of 42 Islamic banks from 15 countries between 2007 and 2014. The results show a negative correlation between liquidity risk and cash ratio, as the cash balance can be used to meet any demands for liquidity from the bank’s customers. There is negative correlation between liquidity risk and securities held by the bank, since banks which need liquidity can sell these assets to meet any liquidity shortages they face. Bank size also has a negative relationship with liquidity risk, as larger banks tend to have more stability and customers feel safer dealing with large banks. Bank’s equity also has a negative correlation with liquidity risk, as equity is a more stable source of funding for banks, a higher ratio of equity lowers liquidity risk. On the other hand, there is a positive relationship with high profit assets, as banks shift their portfolio towards more profitable assets in order to increase their earnings, they face greater liquidity risk, a positive relationship also exists with bad finance provision. Additionally, the findings demonstrate that the relationship between bank size and liquidity risk is not linear.

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Amin, Syajarul Imna Mohd, Aisyah Abdul-Rahman, and Nurhafiza Abdul Kader Malim. "Liquidity risk and regulation in the Organization of the Islamic Cooperation (OIC) banking industry." Asian Academy of Management Journal of Accounting and Finance 17, no. 2 (December 10, 2021): 29–62. http://dx.doi.org/10.21315/aamajaf2021.17.2.2.

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The recurring crises have evidenced poor liquidity risk management and ineffective regulation in banking. Consequently, banking regulations have undergone continuous reforms to bolster stability in the banking system. Nonetheless, theoretical and empirical evidence provide conflicting results that warrant comprehensive research, particularly for emerging Islamic banking. This study examines the role of banking regulation on the liquidity risk of 245 conventional banks and 68 Islamic banks from selected 14 Organization of the Islamic Cooperation (OIC) from 2000 to 2017 utilising the dynamic panel GMM (generalized method of moments) technique. We measure liquidity risk using the Net Stable Funding Ratio (NSFR) and the total financing-to-total deposits and short-term funding (LDEP). Meanwhile, the regulatory measures are asset restriction (AR), private monitoring (PM), supervisory power (SP) and capital requirements (CR). The findings suggest that regulation has a limited impact on bank liquidity risk. The CR supports the value creation of regulation through the reduction in banks’ liquidity risks, while PM and SP are agency costs of regulation that lead to higher liquidity risks. The impact of CR is lower on liquidity risk in Islamic banking than conventional ones, probably due to limited Islamic liquidity risk management facilities. Thus, regulators should strengthen Islamic liquidity risk instruments and markets to facilitate Islamic banking growth.

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Inekwe, John Nkwoma, Yi Jin, and Maria Rebecca Valenzuela. "Global financial network and liquidity risk." Australian Journal of Management 43, no. 4 (July 24, 2018): 593–613. http://dx.doi.org/10.1177/0312896218766219.

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This article investigates the impact of global financial integration on liquidity risk. Using the network approach and bank-level data for 95 countries, we find weak asymmetry in the relationship between net stable funding and financial connectedness. Our results suggest that the degree of connectedness between banks is inversely related to funding stability. We also find that banks that are strongly connected to important lenders take on more risks relative to those that have independent access to finance in the financial network. Our results are consistent and invariant when either internal or external instruments are used to resolve econometric issues. JEL Classification: F21, F34, F36, G15, G33

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Bu, Yumeng. "Research on the Impact of Financing Liquidity on Risk-taking of Commercial Banks." MATEC Web of Conferences 267 (2019): 04012. http://dx.doi.org/10.1051/matecconf/201926704012.

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Insufficient liquidity and maturity mismatches lead to bank risks and financial crises. After Basel III included the net stable funding ratio into regulatory indicators, the relationship between the liquidity indicators represented by the net stable capital ratio and the bank's risk exposure triggered discussions among domestic and foreign scholars. This paper uses the data of China's commercial banks, mainly discussing the mutual influence of internal financing liquidity and external financing liquidity on the risk exposure of banks, and then putting forward some suggestions on how to reduce bank risks through financing liquidity.

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Shirasu, Yoko. "Liquidity Risk of Japanese Corporate Bonds and Bank Funding." Global Economy and Finance Journal 9, no. 1 (March 2016): 38–55. http://dx.doi.org/10.21102/gefj.2016.03.91.04.

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Marozva, Godfrey. "Liquidity And Bank Performance." International Business & Economics Research Journal (IBER) 14, no. 3 (April 30, 2015): 453. http://dx.doi.org/10.19030/iber.v14i3.9218.

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This article is based on empirical research on the relationship between liquidity and bank performance for South African banks for the period between 1998 and 2014. The study employed the Autoregressive Distributed Lag (ARDL)-bound testing approach and the Ordinary Least Squares (OLS) to examine the nexus between net interest margin and liquidity. Liquidity in this article is viewed in the context of the market liquidity risk and funding liquidity risk. The study observes that there is a negative significant deterministic relationship between net interest margin and funding liquidity risk. However, there is an insignificant co-integrating relationship between net interest margin and the two measures of liquidity. Based on this research it is recommended that further research should be conducted to investigate liquidity in the context of asset- liability mismatches. Financial institutions also should realise that liquidity is a short-run phenomenon that has to be analysed as such.

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Sherina, Sherina, Thomas Sumarsan Goh, Elidawati Elidawati, and Edison Sagala. "Pengaruh Struktur Aset, Resiko Bisnis, Pajak dan Likuiditas terhadap Keputusan Pendanaan pada Perusahaan Kawi." Ekonomis: Journal of Economics and Business 6, no. 2 (September 28, 2022): 830. http://dx.doi.org/10.33087/ekonomis.v6i2.647.

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In running a company, funding is needed for all company activities. Funding decisions have a very important role in the survival of a company. There are two sources of funding in the company, namely internal and external sources. Internal sources are retained earnings and external sources are debt and issued shares. Company’s manager must consider which sources would have the best result on the company. The analytical technique used in this research is a comparative descriptive analysis technique. Primary datas were collected through interviews and observations while secondary data were obtained from literatures related to the research topic. Asset structure, business risk, tax, liquidity and funding decisions are used as research objects. The results shows that asset structure, risk and liquidity had no effect on funding decisions at Kawi company. Taxes had an effect on funding decisions at Kawi company. Asset structure, business risk, tax and liquidity together have no effect on funding decisions at Kawi company.

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Zafrizal, Meliza, Rubayah Yakob, and Soo Wah Low. "The influence of liquidity risk on efficiency in rural banks: the moderating role of interbank borrowing fund." Asian Academy of Management Journal of Accounting and Finance 17, no. 2 (December 10, 2021): 63–79. http://dx.doi.org/10.21315/aamjaf2021.17.2.3.

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High competition in Indonesian banking sectors has resulted in the non-survival of rural banks in Indonesia in the long run. The lack of third-party funding becomes one of the most important factors that cause many rural banks to face liquidity risk. Hence, many rural banks use interbank borrowing fund as an alternative source of funding in order to meet their liquidity requirement. Moreover, this risk also leads to many rural banks in Indonesia having to deal with low efficiency problem. This research examines not only the influence of liquidity risk on efficiency but also the role of interbank borrowing fund as a moderator variable. Random effect regression analysis reveals that liquidity risk has negative influence on efficiency. Furthermore, as moderator variable, interbank borrowing fund is shown to enhance the influence of liquidity risk on efficiency. This research becomes guidance for rural banks in managing their liquidity risk and efficiency. In addition, this research also can provide direction for authority in setting some regulation regarding to rural banks’ activities in interbank market.

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Kitsul, Yuriy, and Marcelo Ochoa. "Funding Liquidity Risk and the Cross-section of MBS Returns." Finance and Economics Discussion Series 2016, no. 052 (June 2016): 1–42. http://dx.doi.org/10.17016/feds.2016.052.

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Rokhim, Rofikoh, and In Min. "Funding Liquidity and Risk Taking Behavior in Southeast Asian Banks." Emerging Markets Finance and Trade 56, no. 2 (August 3, 2018): 305–13. http://dx.doi.org/10.1080/1540496x.2018.1483230.

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Gallitschke, Janek, Stefanie Seifried (née Müller), and Frank Thomas Seifried. "Interbank interest rates: Funding liquidity risk and XIBOR basis spreads." Journal of Banking & Finance 78 (May 2017): 142–52. http://dx.doi.org/10.1016/j.jbankfin.2017.01.002.

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Galletta and Mazzù. "Liquidity Risk Drivers and Bank Business Models." Risks 7, no. 3 (August 25, 2019): 89. http://dx.doi.org/10.3390/risks7030089.

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This paper examines the bank liquidity risk while using a maturity mismatch indicator of loans and deposits (LTDm) during a specific period. Core banking activities that are based on the process of maturity transformation are the most exposed to liquidity risk. The financial crisis in 2007–2009 highlighted the importance of liquidity to the functioning of both the financial markets and the banking sector. We investigate how characteristics of a bank, such as size, capital, and business model, are related to liquidity risk, while using a sample of European banks in the period after the financial crisis, from 2011 to 2017. While employing a generalized method of moment two-step estimator, we find that the banking size increases the liquidity risk, whereas capital is not an effective deterrent. Moreover, our findings reveal that, for savings banks, income diversification raises the liquidity risk while investment banks reliant on non-deposit funding decrease the exposure to liquidity risk.

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S, Ruth Dwijayanti, and Hersugondo Hersugondo. "Pengaruh Ukuran Perusahaan, Profitabilitas, Rasio Kecukupan Modal, Biaya Pendanaan, dan Efisiensi Operasional Terhadap Risiko Likuiditas Perusahaan Perbankan Yang Terdaftar di Bursa Efek Indonesia Tahun 2016-2020." Jurnal Riset Inspirasi Manajemen dan Kewirausahaan 6, no. 2 (September 28, 2022): 93–100. http://dx.doi.org/10.35130/jrimk.v6i2.325.

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The purpose of this research is to prove and analyze the effect of firm size, profitability, capital adequacy ratio, funding costs, and operational efficiency on liquidity risk and credit risk in banking companies listed on the Indonesia Stock Exchange. In this study, the population used were banking companies listed on the Indonesia Stock Exchange, while the sample consisted of 27 banking companies selected using the purposive sampling method. The data analysis method used to prove the truth of the hypothesis is panel data regression which is processed using SPSS 20. The data used is from 2016 to 2020. Based on the results of hypothesis testing it was found that Bank size has a positive significant effect on liquidity risk and has a non-significant positive effect on credit risk. Profitability has an insignificant negative effect on liquidity risk and an significant negative effect on credit risk. The capital adequacy ratio has a significant positive effect on liquidity risk and an insignificant positive effect on credit risk. Funding costs have a significant positive effect on liquidity risk and an insignificant negative effect on credit risk. Operational efficiency has an insignificant negative effect on liquidity risk and an insignificant negative effect on credit risk.

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Abdul-Rahman, Aisyah, Noor Latifah Hanim Mohd Said, and Ahmad Azam Sulaiman. "Financing Structure and Liquidity Risk: Lesson from Malaysian Experience." Journal of Central Banking Theory and Practice 6, no. 2 (May 1, 2017): 125–48. http://dx.doi.org/10.1515/jcbtp-2017-0016.

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Abstract This study examines the relationship between financing structure and bank liquidity risk. We compare the findings between Islamic and conventional banks for the case of Malaysia. We adopt four measures to represent financing structure; namely 1) real estate financing, 2) financing concentration, 3) stability of short-term financing structure and 4) stability of medium-term financing structure. Two BASEL III liquidity risk measures are tested; namely, liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) to measure short- and long-term liquidity risk, respectively. Based on panel data regression comprising 27 conventional and 17 Islamic banks from 1994 to 2014, our findings show that real estate financing and stability of short-term financing structure for Islamic banks are positively related to both liquidity risk measures. This implies that an increasing number of real estate financing and a stable short-term financing structure may increase Islamic banks’ short- and long-term liquidity risks. However, although real estate financing does not affect conventional banks’ liquidity risks, a stable short-term financing structure and increasing financing concentration can positively influence bank long-term liquidity risk. Our findings shed light crucial policy implications for regulatory bodies and market players in the context of liquidity risk management framework as well as the need to develop a separate framework between conventional and Islamic banking institutions.

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Kunjal, Damien. "Evaluating the Liquidity Response of South African Exchange-Traded Funds to Country Risk Effects." Economies 10, no. 6 (June 2, 2022): 130. http://dx.doi.org/10.3390/economies10060130.

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Liquidity is important for the stability of financial markets and the growth of national economies. However, the liquidity of financial markets may be influenced by country risk shocks through informational asymmetry, funding constraints, and portfolio rebalancing activities. Therefore, the objective of this study is to investigate the effects of disaggregated country risk components on the liquidity of the South African Exchange-Traded Fund (ETF) market. The sample employed segregates South African ETFs based on their benchmarking styles—particularly, ETFs with domestic benchmarks and ETFs with international benchmarks. The results from the panel Autoregressive Distributed Lag (ARDL) model suggest that the liquidity of ETFs tracking domestic benchmarks is influenced positively by all country risk components in the long run, although only political and financial risks positively influence its short-run liquidity. Similarly, political and economic risk shocks positively influence the liquidity of ETFs tracking international benchmarks in the long-run; however, financial risk negatively influences its liquidity in both the long and short run. These findings suggest that investors can improve the overall performance and liquidity of their portfolios by taking into account the stability of political, financial, and economic risks.

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Kayani, Ghulam Mujtaba, Yasmeen Akhtar, Chen Yiguo, Tahir Yousaf, and Syed Jawad Hussain Shahzad. "The Role of Regulatory Capital and Ownership Structure in Bank Liquidity Creation: Evidence From Emerging Asian Economies." SAGE Open 11, no. 2 (April 2021): 215824402110060. http://dx.doi.org/10.1177/21582440211006051.

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We examine the effect of regulatory capital and ownership structure on banks’ liquidity creation in emerging Asian economies. We find a positive association between regulatory capital and bank liquidity creation, which is consistent with the risk-absorption hypothesis. Bank size has a positive relation with liquidity creation, implying that large banks have more capacity to create liquidity as they enjoy more of the safety net provided by lenders of last resort in the event of crisis, the advantage of reputational benefit, and easier access to external market funding. The negative effect of the bank funding structure is that, as the subordinate debt is typically uninsured, higher funding costs lead banks to reduce liquidity creation. The results imply that an increase in interest rates worsens liquidity creation. For ownership structure, the results show the significance of the impact of ownership concentration on liquidity creation. Banking institutions having higher equity and higher concentration ownership leads to improved liquidity creation.

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Altinoglu, Levent, and Jin-Wook Chang. "Information Externalities, Funding Liquidity, and Fire Sales." Finance and Economics Discussion Series, no. 2022-052 (August 2022): 1–82. http://dx.doi.org/10.17016/feds.2022.052.

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We develop a theory of learning in a model of fire sales and collateralized debt to study how beliefs about fundamentals are shaped by market conditions. Agents exchange short-term debt contracts to invest in a long-term risky asset, and receive shocks to the opportunity cost of funds (cost shocks) and news about the fundamental of the asset, both of which are private information. Asset prices play a dual role of clearing markets and conveying agents' private information, but markets are informationally inefficient: Agents can partially, but never fully, infer their counterparties' private information from asset prices. The informational inefficiency of markets is more acute when liquidity conditions are especially tight or loose, as this impairs ability of prices to reveal private information about fundamentals. As a result, beliefs about fundamentals are shaped endogenously by cost shocks which are orthogonal to fundamentals, leading to socially costly booms and busts in asset prices. The equilibrium is constrained inefficient due to an information externality in which agents do not internalize how their choices affect the information set of other agents. Interventions in funding markets can stabilize asset prices by altering perceptions of risk.

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Fall, Malick, and Jean-Laurent Viviani. "A new multi-factor risk model to evaluate funding liquidity risk of banks." European Journal of Finance 22, no. 11 (January 7, 2015): 985–1003. http://dx.doi.org/10.1080/1351847x.2014.996656.

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Smaoui, Houcem, Karim Mimouni, Héla Miniaoui, and Akram Temimi. "Funding liquidity risk and banks' risk-taking: Evidence from Islamic and conventional banks." Pacific-Basin Finance Journal 64 (December 2020): 101436. http://dx.doi.org/10.1016/j.pacfin.2020.101436.

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Cucinelli, Doriana. "The relationship between liquidity risk and probability of default: Evidence from the Euro area." Risk Governance and Control: Financial Markets and Institutions 3, no. 1 (2013): 42–50. http://dx.doi.org/10.22495/rgcv3i1art5.

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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.

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Nur Mariana Samosir, Susy Muchtar,. "The Effect of Funding Liquidity on Risk Taking Behaviour of Conventional Banks." Jurnal Manajemen 24, no. 1 (March 2, 2020): 139. http://dx.doi.org/10.24912/jm.v24i1.635.

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This Research aims to determine the effect of funding liquidity on risk taking behaviour. Sample used was 36 conventional banks listed on Indonesia Stock Exchange in the period 2014-2018. The sampling technique used was purposive sampling and the method analysis was panel data regression. The independent variable are funding liquidity measured by deposits, loan and size, and the control variable are gross domestic product, interest rate and unemployee, and the dependent variable are risk taking behavior. The results showed that deposits and loan has negative effect on risk taking behavior. Size, gross domestic product, interest rate and unemployee has no effect on risk taking behavior. The results of this research are expected to be the reference for companies to see the factors that influence risk taking behavior.

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Hlatshwayo, L. N. P., M. A. Petersen, J. Mukuddem-Petersen, and C. Meniago. "Basel III Liquidity Risk Measures and Bank Failure." Discrete Dynamics in Nature and Society 2013 (2013): 1–19. http://dx.doi.org/10.1155/2013/172648.

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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.

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Mairafi Salihu, Liman, Sallahuddin Hassan, and Shamsul Bahrain Mohamed-Arshad. "Comparative Analysis on Liquidity and Risk-Taking Behaviour between Islamic and Conventional Banks in MENA Region." Journal of Islamic Economic and Business Research 2, no. 2 (December 27, 2022): 172–88. http://dx.doi.org/10.18196/jiebr.v2i2.68.

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We compare the effect of liquidity on risk-taking between Islamic and conventional banks in the MENA region over the period 2005-2017. Using the fixed effect panel model with panel-corrected standard error, we found that funding liquidity in both Models significantly affects conventional banks' risk-taking behaviour, but the effect on the Islamic counterpart is insignificant. However, liquidity risk and bank activities represented by loans significantly affect Islamic bank risk-taking behaviour but show no significant effect on conventional banks. However, the effect varies with risk-taking proxies and the size of banks. This entails liquidity and bank risk-taking behaviour that differs with the type of banking system and the countries’ peculiarities. Thus, liquidity regulation should be implemented with the consideration of other region and their peculiarities.

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Ali, Muhammad, Amna Sohail, Lubna Khan, and Chin-Hong Puah. "Exploring the role of risk and corruption on bank stability: evidence from Pakistan." Journal of Money Laundering Control 22, no. 2 (May 7, 2019): 270–88. http://dx.doi.org/10.1108/jmlc-03-2018-0019.

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Purpose This paper aims to explore the impact of liquidity risk, credit risk, funding risk and corruption on bank stability of the banking system in Pakistan. Design/methodology/approach The empirical analysis is confined to 24 retail banks, which include 5 Islamic and 19 conventional banks during the period of 2007-2015. Findings The findings of this study suggest that bank size, liquidity risk, funding risk and corruption exert a positive impact on bank stability. Additionally, the authors find a negative relationship between credit risk and bank stability. Originality/value As per the knowledge of the authors, the present research is the first attempt that discusses the issues of bank stability related to risk and corruption faced by the banking system.

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Kocaarslan, Baris, and Ugur Soytas. "The Asymmetric Impact of Funding Liquidity Risk on the Volatility of Stock Portfolios during the COVID-19 Crisis." Sustainability 13, no. 4 (February 20, 2021): 2286. http://dx.doi.org/10.3390/su13042286.

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In this study, we identify economic transmission channels through which changes in funding liquidity conditions in interbank markets asymmetrically affect volatilities of stock portfolios during the COVID-19 crisis. For the purpose of this study, the quantile regression approach is utilized. Controlling for macroeconomic factors, we document that volatilities of high-risk portfolios increase more in response to a deterioration in funding liquidity conditions compared to less risky portfolios. More importantly, this increase intensifies in high-volatility periods of high-risk portfolios, which implies the impact is stronger during uncertain economic environments, such as the one caused by the COVID-19 outbreak.

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Tammenga, Alette, and Pieter Haarman. "Liquidity risk regulation and its practical implications for banks: the introduction and effects of the Liquidity Coverage Ratio." Maandblad Voor Accountancy en Bedrijfseconomie 94, no. 9/10 (October 21, 2020): 367–78. http://dx.doi.org/10.5117/mab.94.51137.

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Following the financial crisis, quantitative liquidity risk regulation was introduced by means of the Liquidity Coverage Ratio (LCR). This literature study aims to investigate whether the introduction of the LCR leads to better liquidity risk management in banks. It elaborates on the drivers and definition of liquidity risk as well as the history, benefits and goals of this regulation. It also delves into the exact composition of the ratio and the assumptions used. The impact on bank lending as well as banks' business model and risk management is addressed, as well as the interaction with monetary policy operations and capital regulation. This paper then describes the operational differences that were observed after the implementation, and behavioral aspects. We also address the Net stable Funding Ratio (NSFR) and the discussion on interaction between the two indicators and possible redundancy. We have found that the introduction of the LCR leads to better management of liquidity risk for most financial institutions, but more harmonious implementation throughout the sector could reduce liquidity risk even further.

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WU, LIXIN, and DAWEI ZHANG. "xVA: DEFINITION, EVALUATION AND RISK MANAGEMENT." International Journal of Theoretical and Applied Finance 23, no. 01 (February 2020): 2050006. http://dx.doi.org/10.1142/s0219024920500065.

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xVA is a collection of valuation adjustments made to the classical risk-neutral valuation of a derivative or derivatives portfolio for pricing or for accounting purposes, and it has been a matter of debate and controversy. This paper is intended to clarify the notion of xVA as well as the usage of the xVA items in pricing, accounting or risk management. Based on bilateral replication pricing using shares and credit default swaps, we attribute the P&L of a derivatives trade into the compensation for counterparty default risks and the costs of funding. The expected present values of the compensation and the funding costs under the risk-neutral measure are defined to be the bilateral CVA and FVA, respectively. The latter further breaks down into FCA, MVA, ColVA and KVA. We show that the market funding liquidity risk, but not any idiosyncratic funding risks, can be bilaterally priced into a derivative trade, without causing price asymmetry between the counterparties. We call for the adoption of VaR or CVaR methodologies for managing funding risks. The pricing of xVA of an interest-rate swap is presented.

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Hlebik, Sviatlana. "Liquidity Risk under The New Basel Global Regulatory Framework." Applied Economics and Finance 4, no. 6 (October 30, 2017): 78. http://dx.doi.org/10.11114/aef.v4i6.2674.

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This paper contributes to understanding liquidity risk and its role in systemic financial crises. It focuses on the new banking regulation Basel III, in particularly on the Liquidity risk ratio that measures long-term liquidity positions of European banks. It emphasizes the importance and the issues relating to the Net Stable Funding Ratio (NSFR) which will become a minimum standard by 1 January 2018. Application at a level of 100% to credit institutions and systemic investment firms is not however expected before 2020, two years after the date of entry into force of the proposed Regulation. The paper aims to analyze the relationship between NSFR and banking stability, financial markets factors and central bank operations, in order to understand the potential impact of the key components of the new Basel global regulatory framework.

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Clouse, James A. "Balancing Before and After: Treasury Market Reform Proposals and the Connections Between Ex-Ante and Ex-Post Liquidity Tools." Finance and Economics Discussion Series 2022, no. 004 (February 10, 2022): 1–29. http://dx.doi.org/10.17016/feds.2022.004.

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This paper develops a simple framework that helps to draw out some of the potential connections between ex-ante liquidity risk management tools such as liquidity requirements or mandatory fees and ex-post liquidity tools such as a lender of last resort. A central message of this analysis is that policy actions that expand the lender of last resort function so as to better address periods of financial distress are likely to be most effective when accompanied by regulations or other mechanisms that encourage socially-responsible ex-ante liquidity risk management on the part of financial firms. Regulation in the form of a liquidity coverage requirement can be helpful in moving private sector outcomes toward a social optimum. A mandatory fee schedule also emerges as a potentially very useful tool. The structure of the optimal fee schedule depends on both the scale of volatile liabilities and the extent of “liquidity coverage” maintained to cover potential funding shortfalls. Both liquidity requirements and mandatory fees can help to address a form of time consistency problem in connection with the provision of ex-post liquidity support through a lender of last resort. The framework also provides some potentially useful benchmarks in evaluating the distribution of liquidity risks across different classes of financial firms.

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Vogiazas, Sophocles, and Constantinos Alexiou. "Liquidity and the business cycle: Empirical evidence from the Greek banking sector." Ekonomski anali 58, no. 199 (2013): 109–25. http://dx.doi.org/10.2298/eka1399109v.

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In the aftermath of the global financial turmoil the negative market sentiment and the challenging macroeconomic environment in Greece have severely affected the banking sector, which faces funding and liquidity challenges, deteriorating asset quality, and weakening profitability. This paper aims to investigate how banks? liquidity interacted with solvency and the business cycle during the period 2004-2010. To this end a panel of 17 Greek banks is utilized which, in conjunction with cointegrating techniques and one-way static and dynamic panel models, explores the presence and the strength of the relationship between banks? liquidity and the business cycle, while allowing for the role of banks? solvency. Addressing the liquidity risk of the Greek banking sector and the liquidity-solvency nexus remains largely an uncharted area. The results generated provide clear-cut evidence on the linkages between banks? market liquidity and the business cycle, as reflected in the real GDP and the effective exchange rate. Yet the results display a transmission channel that runs from banks? solvency to liquidity and from country risk to bank risk.

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Ilyas, Rahmat. "Analisis Risiko Pembiayaan Bank Syariah." BISNIS : Jurnal Bisnis dan Manajemen Islam 7, no. 2 (October 23, 2019): 189. http://dx.doi.org/10.21043/bisnis.v7i2.6019.

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Financing or financing is funding provided by one party to another party to support the planned investment, whether done alone or in an institution. Risk in the banking context is a potential event, both predictable and unpredictable that has a negative impact on bank income and capital. The main reason for the occurrence of credit risk is that banks are too easy to lend or invest because they are too required to take advantage of excess liquidity, so that credit assessments are less careful in anticipating various possible business risks that they finance. Risk management is needed to identify, measure and control various types of risk, because it becomes a very basic tool to support the sustainability of the bank's business. The type of risk management that is closely related to the role of DPS is reputation risk, which in turn has an impact on displaced commercial risk, such as liquidity risk and other risks. The function and role of DPS in Islamic banks has strong relevance to the risk management of Islamic banking, namely reputation risk, which in turn impacts other risks such as liquidity risk.

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-, Irawati Junaeni. "How Big The Role of Credit Risk, Liquidity Risk and Capital Have an Effect On The Profitability of The 10 Largestt Bank in Indonesia." International Journal of Science, Technology & Management 2, no. 1 (January 27, 2021): 179–89. http://dx.doi.org/10.46729/ijstm.v2i1.146.

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The purpose of this research is to analyze how the effect of credit risk, liquidity risk, bank capital, on profitability. The ratio used to measure credit risk using the Non Performing Loan (NPL), liquidity risk using the Loan to Funding Ratio ( LFR) and bank capital using the Capital Adequacy Ratio (CAR). The sample in this study were the 10 largest banks in Indonesia based on total assets. The analysis technique used in this research is panel data regression with fixed effects. The data processing tool used in this study is the Eviews 10 program. The partial test results show that the variables of credit risk and bank capital have an effect on profitabilityas measured by Return on Assets (ROA). Credit risk shows a negative and significant effect on profitability. And bank capital has a positive and significant effect on profitability. Meanwhile, liquidity risk has no significant effect on profitability. Simultaneously, the variables of credit risk, liquidity risk and capital have an effect of 90.17% on profitability. The remaining 9.83% was influenced by other factors not examined in this study

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Kausar, Rehana, Zeeshan Mahmood, and Ulfat Abbas. "Impact of Net Stable Funding Ratio Regulations on Net Interest Margin: A Multi-Country Comparative Analysis." Journal of Accounting and Finance in Emerging Economies 2, no. 2 (December 31, 2016): 93–102. http://dx.doi.org/10.26710/jafee.v2i2.106.

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We empirically investigate the impact of liquidity framework proposed under Basel III, namely Net Stable Funding Ratio on Net Interest Margin for 385 banks in SAARC countries (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) along with five developed countries i.e. Australia, Canada, China, Japan and United State over 2003-2013. The NSFR in Basel III liquidity necessity intended to limit funding risk emerging from maturity conflicts between assets and liabilities of overall countries. The results indicate that there is also a gap between developing and developed countries to managing the stability of their funding source as well as liquidity of its assets is a benefit to them and is also transformed into net interest margin by comparison of developing and developed countries. In addition, this study also proved the findings of previous researches in developed countries that are relevant to bank determinants and net interest margin in the world.

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Ben Khelifa, Soumaya. "The European hedge funds industry: An empirical analysis of performance, liquidity, and growth." Corporate Governance and Sustainability Review 5, no. 2 (2021): 89–101. http://dx.doi.org/10.22495/cgsrv5i2p8.

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While the performance of hedge funds has grabbed much attention from researchers, a few studies have been conducted on the drivers of hedge fund liquidity and performance (Shaub & Schmid, 2013). This study proposes new approaches to investigate the effect of share restrictions on European hedge fund performance and liquidity. We run different regressions of 1) returns, 2) flows, and 3) exposure to market liquidity risk on share restrictions, managerial incentives, and a set of control variables as independent variables. Using a sample of 1423 European hedge funds, our results suggest that restrictions imposed by European hedge funds add economic value to investors. Furthermore, we find that European hedge funds with strong share restrictions take on lower liquidity risk. There is a weak difference in liquidity risk exposure across directional European hedge funds with and without share restrictions. In addition, European hedge funds’ experience, large outflows during a crisis, and all share restrictions do not seem to be significantly related to funding flows in the crisis period, as well as in times of non-crisis. Finally, only the groups of young funds are associated with significant funds exposure to market liquidity risk

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Ferrouhi, El Mehdi. "Bank Liquidity and Financial Performance: Evidence from Moroccan Banking Industry." Business: Theory and Practice 15, no. 4 (December 19, 2014): 351–61. http://dx.doi.org/10.3846/btp.2014.443.

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This paper aims to analyze the relationship between liquidity risk and financial performance of Moroccan banks and to define the determinants of bank’s performance in Morocco during the period 2001–2012. We first evaluate Moroccan banks’ liquidity positions through different liquidity and performance ratios then we apply a panel date regression to identify determinants of Moroccan banks performance. We use 4 bank’s performance ratios, 6 liquidity ratios and we analyze 5 specific determinants and 5 macroeconomic determinants of bank performance. Results show that Moroccan bank’s performance is mainly determined by 7 determinants: liquidity ratio, size of banks, logarithm of the total assets squared, external funding to total liabilities, share of own bank’s capital of the bank’s total assets, foreign direct investments, unemployment rate and the realization of the financial crisis variable. Banks’ performance depends positively on size of banks, on foreign direct investments and on the realization of the financial crisis and negatively on external funding to total liabilities, on share of own bank’s capital of the bank’s total assets and on unemployment rate while the dependence between bank performance and liquidity ratios and bank performance and logarithm of the total assets squared depend on the model used.

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Azmi, Sylvia Nurul, and Nurjanti Takarini. "Analisis Kinerja Keuangan Perbankan Yang Terdaftar di Bursa Efek Indonesia." Jurnal Ilmu Manajemen 11, no. 2 (June 15, 2022): 149. http://dx.doi.org/10.32502/jimn.v11i2.3527.

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The purpose of this study is to find out how the financial performance of banks listed on the IDX can be affected by credit risk, market risk, and liquidity risk. This study uses businesses in the banking sector and is recorded on the IDX from 2017 to 2019 as a research sample of 40 companies using a quantitative research method, namely multiple regression analysis. This study provides results stating that Credit Risk (X1) has a negative effect on Financial Performance with significant (negative) results. Market Risk (X2) has a positive influence on Financial Performance with significant (positive) results. Liquidity Risk (X3) does not affect Financial Performance. It can be concluded that, Non-Performing Loans which are selected as Credit Risk proxies contribute to Financial Performance. Net Interest Margin chosen as a proxy for Market Risk contributes to Financial Performance. Liquidity Risk as proxied by Loan to Funding Ratio contributes to the Financial Performance of banks listed on the IDX.

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Journal articles on the topic 'Liquidity funding risk'

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