Ka rel Brù na, Vy so ká ško la eko no mic ká v Pra ze* 1. Úvod Key words mo ne ta ry po li cy, in te rest ra tes, cli ent in te rest ra tes, di sin flati on, bank JEL Clas si fi cati on E43, E44, G12

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.

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This article deals with the relationship between market and client interest rates in the period of inflation stabilisation and banking system transformation in the Czech Republic in 1999–2006. It analyses the character of short-run and long-run equilibrium of the transmission of market interest rates to lending and deposit interest rates. In the theoretical part crucial characteristics of the banking system in transition countries and their effects on interest rate dynamics are discussed. These are the strong position of large state-owned banks, limited power of non-banks, low elasticity of demand for bank products, and high demand for investment and consumption. The empirical analysis shows different behaviour of client interest rates in the short and long run and a significant impact of changing characteristics of the bank sector (growth of competition, reduction in credit risk and an increase in operational efficiency) on the stability of the relationship between market and client interest rates.

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