Academic literature on the topic 'Liquidity surplu'

The present study aims to acknowledge the pre-eminent relationship between the liquidity and profitability which performs a key role in corporate finance. The liquidity management performs an indispensable role as deficient liquidity and surplus liquidity both affects the functioning, profitability, and growth of any organization. The present study analysis is on Tata Pigments Ltd for a period from 2013-14 to 2018-19. The empirical and analytical study applies descriptive statistics, correlation, and regression to test the hypothesis of the study. The findings suggest that there is no significant relationship between the liquidity and profitability. The liquidity indicators do not affect the profitability ratios.

AbstractIn March 2015, the Eurosystem launched its QE programme. The asset purchases induced a rapid and strong increase in excess reserves, implying a structural liquidity surplus in the euro area banking sector. Against this background, the first part of this paper analyses the Eurosystem’s liquidity management during normal times, crisis times and times of too low inflation. With a focus on the latter, the second part of this paper develops a relatively simple theoretical model in which banks operate under a structural liquidity surplus. The model shows that increasing excess reserves have no or even a contractionary impact on bank loan supply. As the newly created excess reserves are heterogeneously distributed across euro area countries, the impact of QE on bank loan supply may differ across countries. Moreover, we derive implications for monetary policy implementation. Increases in the central bank’s main refinancing rate as well as in the minimum reserve ratio and decreases in the central bank’s deposit rate develop expansionary effects on loan supply – contrary to the case in which banks face a structural liquidity deficit.

PurposeThe purpose of this study is two‐fold. The first purpose is to properly measure the level of US property and liability (P/L) insurers liquidity creation, applying the liquidity creation measure developed by Berger and Bouwman. The second purpose is to identify factors affecting P/L insurers' liquidity creation using a regression. Particularly, this paper tests two competing hypotheses regarding the relationship between the level of capital and liquidity creation.Design/methodology/approachThe paper calculates liquidity creation for the US P/L insurers. First, the paper categorizes all items in assets, liabilities and surplus into liquid, semi‐liquid, or illiquid. This process is based on the ease, cost, and time for insurers to meet their contractual obligation to obtain liquid funds or to pay off their liability. The paper also constructs the regression model to test the impact of insurers' surplus level on liquidity creation while controlling for the firm‐specific variables. The paper examines this relationship for the time period between 1998 and 2007.FindingsContrary to the study of depository institutions, the paper reports that P/L insurers are liquidity destroyers than liquidity creators. This paper also provides that liquidity destruction varies over time and differs among insurers in different size. The total amount of liquidity destruction ranges from 47 to 58 percent of insurer total asset. In addition, the results of a regression show that insurer capital is negatively related to the level of liquidity creation. This provides implications that insurers with lower level of capital face more regulatory requirements and are forced to meet liquidity demand more.Practical implicationsThe level of liquidity creation and the trend of liquidity creation of P/L insurers are of particular interest to regulators and consumers because the level of liquidity creation as shown during the financial crisis has a significant adverse impact on the financial intermediaries.Originality/valueThe paper do not aware of any study that attempts to measure liquidity creation by insurers and its relationship with both organizational and financial characteristics. The paper reports that P/L insurers are, unlike depository institutions, liquidity destroyers. Whether or not P/L insurers create/destroy liquidity is an interesting economic question to shed light on the roles of P/L insurers as a financial intermediary.

The non-linear market microstructure (MM) model for financial time series modeling is a flexible stochastic volatility model with demand surplus and market liquidity. The estimation of the model is difficult, since the unobservable surplus demand is a time-varying stochastic variable in the return equation, and the market liquidity arises both in the mean term and in the variance term of the return equation in the MM model. A fast and efficient Markov Chain Monte Carlo (MCMC) approach based on an efficient simulation smoother algorithm and an acceptance-rejection Metropolis–Hastings algorithm is designed to estimate the non-linear MM model. Since the simulation smoother algorithm makes use of the band diagonal structure and positive definition of Hessian matrix of the logarithmic density, it can quickly draw the market liquidity. In addition, we discuss the MM model with Student-t heavy tail distribution that can be utilized to address the presence of outliers in typical financial time series. Using the presented modeling method to make analysis of daily income of the S&P 500 index through the point forecast and the density forecast, we find clear support for time-varying volatility, volatility feedback effect, market microstructure theory, and Student-t heavy tails in the financial time series. Through this method, one can use the estimated market liquidity and surplus demand which is much smoother than the strong stochastic return process to assist the transaction decision making in the financial market.

This paper attempts to examine the relationship between financial performance and their determinants in the case of Indian life insurance sector. This study is carried out using Correlation and Multiple Regression Analysis for 23 out of 24 companies for 10 years from 2009-10 to 2014-15. The financial performance is indicated by Return on Assets (ROA) and the independent variables chosen are commission, expenses, liquidity, size, solvency ratio, surplus (deficit)/policy holder’s liability, tangibility and underwriting risk. The quality of data was assessed using Autocorrelation, Heteroskedasticity, Multicollinearity. The results of the model indicated that commission, size and surplus (deficit)/policy holder' are significantly related to financial performance, commission is negatively related and size and surplus(deficit)/policy holder’s liability are positively related to financial performance whereas other factors expenses, liquidity, solvency ratio, tangibility and underwriting risk are not significant related to financial performance.

We study interbank lending and asset sales markets in which banks with surplus liquidity have market power vis-à-vis banks needing liquidity, frictions arise in lending due to moral hazard, and assets are bank-specific. Surplus banks ration lending and instead purchase assets from needy banks, an inefficiency more acute during financial crises. A central bank acting as a lender-of-last-resort can ameliorate this inefficiency provided it is prepared to extend potentially loss-making loans or is better informed than outside markets, as might be the case if it also performs a supervisory role. This rationale for central banking finds support in historical episodes. (JEL E58, G01, G21, G28, L13, N21)

Abstract The paper contains an analysis of the economic and regulatory concept of bank liquidity in the context of systemic liquidity shock. A formal model analysis shows that the application of liquidity coverage ratio (LCR) based on Basel III will lead to a significant adaptation of banks liquidity management. LCR causes a change in bank’s liquidity allocation and funding to be less effective and more costly and restrictive for providing credits comparing with economic determinants. It is demonstrated that the application of LCR underestimates actual liquidity position of a bank and leads to allocation ineffectiveness. The empirical part contains simulation of impacts of systemic liquidity shock on the banking sector’s ability to withstand the unfavourable credit shock while solvency is maintained. The results confirm the robustness of the Czech banking system ensuing from the systemic surplus of liquidity, high volume of bank capital and its high profitability. The estimations of the VAR model show that the relations between liquidity characteristics of banks, sources of aggregate liquidity shock, interbank market illiquidity and the credit facilities of the Czech National Bank are relatively weak, supporting the conclusion that the banks face liquidity shocks of non-persistent character.

This paper presents an analytical framework for the identification of vulnerabilities arising from the liquidity and funding profile of banks. It is composed of two pillars—estimation of liquidity needs and the counterbalancing capacity of the total liquid assets—that determine a liquidity surplus or shortfall and the drivers for a range of plausible scenarios. Granular bank-level data on the structure of liabilities, maturation profile, liquid assets quality composition, and asset encumbrance are used for that purpose, also taking into account associated commonality effects. A new liquidity metric is introduced—the distance to liquidity stress indicator (DLSI)—which measures the required stress factor for banks to become illiquid. The novelty of the approach (i.e., taking into account asset encumbrance to determine counterbalancing capacity) provides empirical evidence that asset encumbrance has a significant impact on a bank’s liquidity position, leading to the non-linear behavior of liquidity shortfalls, even in the case of linear stress factors.

We develop an equilibrium model of credit network and trust network in the interbank market. We consider two kinds of decision makers including banks with liquidity surplus and banks with liquidity shortage. We model the behavior of the decision makers, derive the equilibrium conditions, and establish the variational inequality formulation for interbank credit network and trust network. We then utilize the variational inequality formulation to obtain qualitative properties of the equilibrium pattern in terms of existence and uniqueness.

У статті проаналізовано стан ліквідності в банківській системі України та визначено основні проблеми управління ліквідністю банків в післякризовий період.
The situation with liquidity in banking system of Ukraine is analyzed. The main problems of banks liquidity management in post-crisis period are determined.

The diploma thesis focuses on the specification of suitability of legal entities to invest in securities "Exchange Traded Funds" in the current conditions of the Czech Republic. The results of the thesis serve to present alternative, modern ways to invest surplus money and get a new yield. Conclusions can be used by senior management of designated legal entities.

La tesi discute il rischio sistemico e analizza il regolamento macroprudenziale del sistema bancario della Russia. Il primo capitolo esamina il problema del rischio di liquidità sistemica e sviluppa un approccio empirico semplice per stimare il rischio sistemico di finanziamento della liquidità in un sistema bancario e per identificare le banche di rilevanza sistemica. I calcoli sono effettuati utilizzando la distribuzione simulata del surplus di liquidità complessiva (aggregate liquidity surplus) determinata, a sua volta, utilizzando ICA (Independent Component Analysis). L'importanza sistemica delle banche è quindi valutata in base al loro contributo alla variabilità del surplus di liquidità del sistema. Il secondo e il terzo capitolo analizzano le possibili conseguenze dell'adozione delle regole di Basilea II (prevista per il 2015) in relazione ai requisiti di capitale per la stabilità del sistema bancario in Russia. Due metodologie sono utilizzate. Nel secondo capitolo, è stata utilizzata una metodologia empirica basata su una distribuzione congiunta, mentre il modello copula è usato nel terzo capitolo. In entrambi i casi si applica l'approccio Value-at-Risk (VaR). È importante sottolineare che i risultati (con entrambe le metodologie) mostrano la considerevole sottocapitalizzazione del sistema bancario russo. L'effetto di pro-ciclicità, però, diventa evidente solo quando viene utilizzata la metodologia empirica di distribuzione congiunta. L'ultimo capitolo tratta della disciplina di mercato nel mercato interbancario russo ed esamina se la disciplina è efficiente nell'influenzare le banche a scegliere rischi e livelli di capitalizzazione adeguati durante il periodo pre-crisi e il periodo successivo. L'esistenza della disciplina di mercato basata sulla quantità è stimata utilizzando il modello di selezione del campione Heckman, mentre l'efficacia della disciplina è analizzata utilizzando il modello di dati longitudinali. I risultati mostrano che la disciplina di mercato era presente prima della crisi e i creditori stranieri erano i più efficienti sotto questo aspetto. Dopo la crisi e le conseguenti perturbazioni i meccanismi di disciplina diventano praticamente inefficienti.
The thesis is devoted to the systemic risk and macroprudential regulation analysis in the Russian banking system. The first chapter examines the issue of systemic liquidity risk and develops a straightforward empirical approach in order to estimate systemic funding liquidity risk in a banking system and to identify systemically important banks. Calculations are carried out using simulated distribution of the aggregate liquidity surplus determined using ICA (Independent Component Analysis). The systemic importance of banks is then assessed according to their contribution to the variability of the system’s liquidity surplus. The second and the third chapters, in turn, analyse the possible consequences of the adoption of the Basel II capital requirements standards (planned for 2015) for the stability of the banking system in Russia. Two methodologies are used. In the second chapter, a methodology based on an empirical joint distribution is employed, while copula modelling is used in the third chapter. In both cases the Value-at-Risk (VaR) approach is applied. Importantly, the results (under both methodologies) show the substantial undercapitalization of the Russian banking system. The procyclicality effect, though, becomes evident only when the empirical joint distribution methodology is employed. The last chapter discusses market discipline in the Russian interbank market and examines whether that is efficient in influencing the risk-taking behaviour of banks during the pre-crisis time and the period afterwards. The existence of quantity-based market discipline is estimated using the Heckman sample selection model, while the efficiency of market discipline is analysed employing the panel data model. The findings show that market discipline was present before the crisis with foreign lenders being the most efficient under this aspect. After the crisis and ensuing distress, in turn, the disciplining mechanisms become practically inefficient.

This chapter focuses on Norges Bank during the Second World War. The Second World War came to Norway on 9 April 1940, when German forces invaded the country. This was one of the darkest days in Norwegian history, but still one of the finest in Norges Bank’s history. In the chaotic morning hours, the large gold reserve was evacuated and, by a long journey in inland Norway and along the coast, finally brought to safety overseas. However, the rest of the war, and of the first pre-war years, brought less glory to Norges Bank. Already before the gold had departed Norway, a gradual inflation of the Norwegian monetary system had started because of the Germans’ requisitions of legal tender through the central bank. In the following years, large sums of Norwegian kroner were withdrawn from Norges Bank as a part of the financing of the occupational force’s activities in Norway. This created a large liquidity surplus, which made monetary policy more or less inefficient, until the surplus was finally eliminated around 1950.

Irrespective of whether advanced economies (AEs) or emerging market economies (EMEs), the number one problem of the global economy is not being able to generate a satisfactory growth. Income levels is in some countries are barely above the per-crisis level. Despite ample liquidity due to quantitative monetary policies, consumption and investment demands are weak. Because high level of indebtedness deter economic agents from using credit. Credit markets still do not function well either. Quantitative easing policies have been successful in containing further deterioration. Despite ample liquidity inflation has not risen, but it did delivered the expected growth. Because banking system in AEs is weak and monetary transmission mechanisms are not functioning well. As for EMEs, commodity prices and World trade appears to be weak; economic growth are slowing down, capex is visibly falling in heavy industrial sectors due to already existing excess capacity. The academia as well as the business community are worried about the appropriateness of the present policies in case another recession comes, central banks will have little ammunition to deal with it. The option being talked of now is what is dubbed as “helicopter Money”. Turkey being an open economy, has been and will be effected by the developments in the global economy through trade, capital flows and expectation channels. By international standards, Turkey have a reasonable growth rate of 3 to 4 %, implying a new growth era where high growth cycle ended due to changing global financial conditions and its structural problems. Future growth performance will depend on the level of investments and savings to finance it. As her own saving is low, foreign capital flows is crucial. High inflation and interest rate are the two negatives, but it has a strong fiscal position, debt / GDP is 32.3%, the budget is almost balanced, producing primary surplus which proved it is resilience in the face of recent failed coup and the negative attitudes displayed by the rating agencies.