› › Three Essays On Bank Liquidity Creation And Funding Liquidity Risk

THREE ESSAYS ON BANK LIQUIDITY CREATION AND FUNDING LIQUIDITY RISK.

Author : Feng Tu

Publisher :

Page : pages

File Size : 30,45 MB

Release : 2015

Category :

ISBN :

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Book Description

According to the modern theory of financial intermediation, liquidity creation is an essential role of banks. Chapter 1 investigates the relationship between diversification of activities conducted by banks and bank liquidity creation. We show that despite the passage of GLBA act in 1999, banks increased their specialization in the traditional loan market and thus became less diversified from 2004 until the end of 2008. In addition, we find evidence that more specialized banks tend to create more excess liquidity during normal times, suggesting too much specialization in mortgage and other types of loans created abundant liquidity leading up to the financial crisis. Chapter 2 calculates the Net Stable Funding Ratio (NSFR) as defined in Basel III for virtually all US commercial banks during the 2001-2013 period. Compared to traditional liquidity risk measures and the NSFR estimated in the related literature, the NSFR based on our calculation is more comprehensive in evaluating funding liquidity risk on banks' balance sheet and off-balance sheet activities and also is superior in capturing the changes in liquidity risk over time. In addition, we graphically show that the deseasonalized and detrended NSFR based on our estimation is able to detect the excessive liquidity risk taking behavior of the banking sector in advance of financial stress. Furthermore, we examine the policy related issue of the effect of stricter capital requirements on bank funding liquidity risk. We find that large and medium banks with higher capital positions tend to increase exposure to liquidity risk during both normal times and the financial crisis. On the other hand, small banks with higher capital ratios tend to have lower liquidity risk exposure. Chapter 3 applies a small variation to the NSFR measure to account for the liquidity risk of brokered deposits and examines the advantage of using the brokered deposits adjusted NSFR (adj.NSFR) in detecting bank financial distress during the period of 2007-2013. The in-sample test results show that the adj.NSFR measure does add significantly incremental explanatory power to the models relying on traditional liquidity ratios. However, its superior ability to identify failures is not so pronounced in the out-of-sample periods.



Bank Liquidity Creation and Financial Crises

Author : Allen N. Berger

Publisher : Academic Press

Page : 296 pages

File Size : 18,32 MB

Release : 2015-11-24

Category : Business & Economics

ISBN : 0128005319

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Book Description

Bank Liquidity Creation and Financial Crises delivers a consistent, logical presentation of bank liquidity creation and addresses questions of research and policy interest that can be easily understood by readers with no advanced or specialized industry knowledge. Authors Allen Berger and Christa Bouwman examine ways to measure bank liquidity creation, how much liquidity banks create in different countries, the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, the effects of bailouts, and much more. They also analyze bank liquidity creation in the US over the past three decades during both normal times and financial crises. Narrowing the gap between the "academic world" (focused on theories) and the "practitioner world" (dedicated to solving real-world problems), this book is a helpful new tool for evaluating a bank’s performance over time and comparing it to its peer group. Explains that bank liquidity creation is a more comprehensive measure of a bank’s output than traditional measures and can also be used to measure bank liquidity Describes how high levels of bank liquidity creation may cause or predict future financial crises Addresses questions of research and policy interest related to bank liquidity creation around the world and provides links to websites with data and other materials to address these questions Includes such hot-button topics as the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, and the effects of bailouts



Three Essays on Liquidity Risk

Author :

Publisher :

Page : 87 pages

File Size : 42,97 MB

Release : 2015

Category : Financial crises

ISBN :

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Book Description

Liquidity risk is inherent to the very nature of the banking activity which is to transform short term liabilities into long term assets. That is why liquidity crises are in one way or another implied in most financial crisis episodes. This thesis contributes to the understanding of how liquidity risk and liquidity crises in the banking and financial sector affect the allocation of resources and the functioning of the economy, and also discusses what could be the best institutional arrangements to share liquidity risk across agents and the best economic policies to avoid liquidity crises. It consists of three chapters focusing on diverse aspects of this topic. The first chapter, co-authored with Katerina-Chara Papioti, provides a new way to measure liquidity risk in the financial sector using the bidding behavior of banks in the bond auctions conducted by central banks. The second chapter examines risk-sharing between agents prone to liquidity shocks obtained through generational and intergenerational coalitions and asset trading in overlapping generation economies. Various institutional arrangements including financial intermediaries, stock markets and government interventions are studied in order to compare their risk sharing performance and optimality. The third chapter examines the international dimension of the liquidity issue and studies theoretically what combination of exchange rate regime and central bank policy is less vulnerable to a combined currency and banking crisis focusing on the sudden stop of capital flows as an underlying source of instability.



Liquidity Risk

Author : E. Banks

Publisher : Springer

Page : 315 pages

File Size : 14,24 MB

Release : 2013-11-06

Category : Business & Economics

ISBN : 1137374403

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Book Description

Liquidity Management is now a core consideration for banks and other financial institutions following the collapse of numerous well-known banks in 2007-8. This timely new edition will provide practical guidance on liquidity risk and its management – now mandatory under new regulation.



High Liquidity Creation and Bank Failures

Author : Zuzana Fungacova

Publisher : International Monetary Fund

Page : 33 pages

File Size : 42,18 MB

Release : 2015-05-06

Category : Business & Economics

ISBN : 1475581807

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Book Description

We formulate the “High Liquidity Creation Hypothesis” (HLCH) that a proliferation in the core activity of bank liquidity creation increases failure probability. We test the HLCH in the context of Russian banking, which provides a natural field experiment due to numerous failures experienced over the past decade. Using Berger and Bouwman’s (2009) liquidity creation measures as a comprehensive proxy for overall bank output, we find that high liquidity creation significantly increases the probability of bank failure; this finding survives multiple robustness checks. Our results suggest that regulatory authorities can mitigate systemic distress and reduce the costs of bank failures to society through early identification of high liquidity creators and enhanced monitoring of their funding and investment activities.



Liquidity Risk Management

Author : Shyam Venkat

Publisher : John Wiley & Sons

Page : 304 pages

File Size : 15,84 MB

Release : 2016-03-02

Category : Business & Economics

ISBN : 1118918797

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Book Description

The most up-to-date, comprehensive guide on liquidity risk management—from the professionals Written by a team of industry leaders from the Price Waterhouse Coopers Financial Services Regulatory Practice, Liquidity Risk Management is the first book of its kind to pull back the curtain on a global approach to liquidity risk management in the post-financial crisis. Now, as a number of regulatory initiatives emerge, this timely and informative book explores the real-world implications of risk management practices in today's market. Taking a clear and focused approach to the operational and financial obligations of liquidity risk management, the book builds upon a foundational knowledge of banking and capital markets and explores in-depth the key aspects of the subject, including governance, regulatory developments, analytical frameworks, reporting, strategic implications, and more. The book also addresses management practices that are particularly insightful to liquidity risk management practitioners and managers in numerous areas of banking organizations. Each chapter is authored by a Price Waterhouse Coopers partner or director who has significant, hands-on expertise Content addresses key areas of the subject, such as liquidity stress testing and information reporting Several chapters are devoted to Basel III and its implications for bank liquidity risk management and business strategy Includes a dedicated, current, and all-inclusive look at liquidity risk management Complemented with hands-on insight from the field's leading authorities on the subject, Liquidity Risk Management is essential reading for practitioners and managers within banking organizations looking for the most current information on liquidity risk management.



Liquidity Risk

Author : E. Banks

Publisher : Springer

Page : 253 pages

File Size : 12,18 MB

Release : 2004-09-24

Category : Business & Economics

ISBN : 0230508111

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Book Description

Much critical attention has been given in recent years to market and credit risks, which have a significant effect on corporate and financial operations and must be understood and managed with care. While these areas have rightly received considerable scrutiny, another critical dimension of financial risk - based on corporate liquidity - has been largely overlooked. Liquidity risk is the risk of loss arising from an inability to quickly realise asset value or obtain funding and can be damaging if not properly considered or actively managed. Lack of liquidity can lead to large losses in asset/liability portfolios and off balance sheet activities and in extreme cases can trigger financial distress and insolvency. Liquidity Risk is a comprehensive treatment of the topic focusing on the nature of the risk, problems that arise in asset and funding liquidity and mechanisms that can be developed to monitor, measure and control such risks.



Bank Liquidity and the Global Financial Crisis

Author : Laura Chiaramonte

Publisher : Springer

Page : 213 pages

File Size : 14,15 MB

Release : 2018-07-09

Category : Business & Economics

ISBN : 3319944002

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Book Description

One of the lessons learned from the Global Financial Crisis of 2007–9 is that minimum capital requirements are a necessary but inadequate safeguard for the stability of an intermediary. Despite the high levels of capitalization of many banks before the crisis, they too experienced serious difficulties due to insufficient liquidity buffers. Thus, for the first time, after the GFC regulators realized that liquidity risk can jeopardize the orderly functioning of a bank and, in some cases, its survival. Previously, the risk did not receive the same attention by regulators at the international level as other types of risk including credit, market, and operational risks. The GFC promoted liquidity risk to a significant place in regulatory reform, introducing uniform international rules and best practices. The literature has studied the potential effects of the new liquidity rules on the behaviour of banks, the financial system, and the economy as a whole. This book provides a comprehensive understanding of the bank liquidity crisis that occurred during the GFC, of the liquidity regulatory reform introduced by the Basel Committee with the Basel III Accord, and its implications both at the micro and macroeconomic levels. Università Cattolica del Sacro Cuore contributed to the funding of this research project and its publication.



Liquidity Risk Measurement and Management

Author : Leonard Matz

Publisher : Xlibris Corporation

Page : 400 pages

File Size : 29,55 MB

Release : 2011-07-20

Category : Business & Economics

ISBN : 1462892450

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Book Description

Villains for the Great Meltdown of 2007-2008 seem plentiful. But the very concept of finding and punishing villains misses the target. Ideally, we learn from past failures. We perfect our craft. Lessons to be learned from the Great Meltdown are not just plentiful - they are also insightful. In LIQUIDITY RISK MEASUREMENT AND MANAGENT -- BASEL III AND BEYOND, Mr. Matz provides detailed, practical analysis and recommendations covering every aspect of liquidity risk measurement and management. * Examples of what went wrong are used extensively. * Best practices procedures are explained. * New regulatory guidance - both qualitative and quantitative, including Basel III - is discussed in detail.* Source material and examples from many countries are included.This is the "how to guide" for liquidity risk managers in financial institutions around the globe.