Determinants which Affect Liquid Asset Ratio of Czech and Slovak Commercial Banks
JEL: C23, G01, G21
liquid assets, panel data regression analysis, commercial banks, Czech Republic, Slovak Republic
The aim of this paper is to find out determinants which affect liquid asset ratio of Czech and Slovak commercial banks. The data cover the period from 2001 to 2010. We consider four bank specific factors and nine macroeconomic factors. Results of panel data regression analysis showed that although Czech Republic and Slovak Republic have a lot in common, different factors determined banks´ liquid assets in individual countries. The liquid asset ratio of Czech banks increases with increase of capital adequacy, with depreciation of Czech koruna and with worsening quality of credit portfolio. Liquidity of Slovak banks decreases with size of the bank, with higher capital adequacy, higher bank liquidity and during periods of financial crisis. Liquidity of Slovak banks is also positively related to economic cycle.
Aspachs, O. et al. (2005). Liquidity, Banking Regulation and the Macroeconomy. Evidence on bank liquidity holdings from a panel of UK-residents banks. Retrieved from: http://www.bis.org/bcbs/events/rtf05AspachsNierTiesset.pdf
Baranyai, E. (2008). Liquidity Risk Management with special interest to the Hungarian banking sector. Saarbrücken: VDM Verlag Dr. Müller.
Bessis, J. (2009). Risk Management in Banking. Chichester: John Wiley & Sons.
BIS (2008). Principles for Sound Liquidity Risk Management and Supervision. Basel: Bank for International Settlements.
BIS (2009). International framework for liquidity risk measurement, standards and monitoring. Basel: Bank for International Settlements.
Bunda, I. and Desqioůbet, J. B. (2008). The Bank Liquidity Smile Across Exchange Rate Regimes. International Economic Journal, 22(3), pp. 361-386. DOI: 10.1080/10168730802287952
Cornet, M. M. et al. (2011). Liquidity risk management and credit supply in the financial crisis. Journal of Financial Economics, 101(2), pp. 297-312. DOI: 10.1016/j.jfineco.2011.03.001
Crockett, A. (2008). Market liquidity and financial stability. In Banque de France Financial Stability Review. Paris: Banque de France, pp. 13-17.
CNB (2010). Financial market supervision report. Prague: Czech National Bank.
Ewerhart, C. and Valla, N. (2008). Financial market liquidity and the lender of last resort. In Banque de France Financial Stability Review. Paris: Banque de France, pp. 133-148.
Fielding, D. and Shortland, A. (2005). Political Violence and Excess Liquidity in Egypt. Journal of Development Studies, 41(4), pp. 542-557. DOI: 10.1080/00220380500092580
Lucchetta, M. (2007). What Do Data Say About Monetary Policy, Bank Liquidity and Bank Risk Taking? Economic Notes by Banca Monte dei Paschi di Siena SpA, 36(2), pp. 189-203.
Matz, L. and Neu, P. (2007). Liquidity Risk Measurement and Management.
A practitioner´s guide to global best practices. Singapore: John Wiley & Sons.
Moore, W. (2010). How do financial crises affect commercial bank liquidity? Evidence from Latin America and the Caribbean. MPRA Paper no. 2010-21473. Munich: Munich Personal RePEc Archive.
Orlowski, L. T. (2008). Stages of the 2007/2008 Global Financial Crisis: Is There a Wandering Asset-Price Bubble? Economic Discussion Paper no. 2008-43. Retrieved from: http://www.economics-ejournal.org/economics/discussionpapers/2008-43.
Praet, P. and Herzberg, V. (2008). Market liquidity and banking liquidity: linkages, vulnerabilities and the role of disclosure. In Banque de France Financial stability Review. Paris: Banque de France, pp. 95-109.
Rauch, C. et al. (2010). Determinants of Bank Liquidity Creation. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1343595
Rychtárik, Š. (2009). Liquidity Scenario Analysis in the Luxembourg Banking Sector. BCDL Working Paper 2009-41. Luxembourg: Banque Centrale du Luxembourg.
Valla, N. et al. (2006). Bank liquidity and financial stability. In Banque de France Financial Stability Review. Paris: Banque de France, pp. 89-104.