Liquidity and transparency in bank risk management

Ratnovski, Lev

doi:10.1016/j.jfi.2013.01.002

Cited by 77 publications

(41 citation statements)

References 58 publications

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“…The novel theory of the timing of liquidity trades originated by Bolton et al When the cost of liquidity and asymmetric information is low enough, banks find it optimal to combine the two in their liquidity risk management (Ratnovski 2013). …”

Section: The Relationship Between the Adjustment Speed Of Net Stable mentioning

confidence: 99%

The Basel III net stable funding ratio adjustment speed and systemic risk

Chen

Wang

et al. 2017

Research in International Business and Finance

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We extend our appreciation to the conference attendees of SYRTO Conference on systemic risk 2015, Amsterdam, Netherland. E-mail: k.ly.1@research.gla.ac.uk (Kim Cuong Ly), z.chen.2@research.gla.ac.uk (Zhizhen Chen), s.wang.1@research.gla.ac.uk (Senyu Wang), y.jiang.1@research.gla.ac.uk (Yuxiang Jiang). Send correspondence to Kim Cuong Ly, Adam Smith Business School, University of Glasgow, University Avenue, Glasgow, G12 8QQ, the UK; telephone: (44) 141 330 7797 and e-mail: k.ly.1@research.gla.ac.uk. 2 AbstractThe theory on the timing of liquidity trades highlights two contrasting rational expectations equilibria for the liquidity adjustment speed effect, namely an immediate-trading equilibrium (trade at the onset of the liquidity shock) and a delayed-trading equilibrium (trade at the last resort). Using a partial adjustment model and an annual data sample of US bank holding companies from 1991 to 2012, we investigate the effect of Net Stable Funding Ratio (NSFR) adjustment speeds on systemic risk. We find that banks with the immediate-trading equilibrium tend to adjust the NSFR quickly in response to the Basel III liquidity requirement, thereby, reducing systemic risk. With the same level of the NSFR, our findings suggest that only the adjustment speed exerts a negative impact on systemic risk. Our evidence shows that small banks strengthen the effects of the negative impact of the NSFR adjustment speed on systemic risk. Our study sheds light on a real-time indicator of the NSFR for Basel III revisions before its implementation in 2018.

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Section: The Relationship Between the Adjustment Speed Of Net Stable mentioning

confidence: 99%

The Basel III net stable funding ratio adjustment speed and systemic risk

Chen

Wang

et al. 2017

Research in International Business and Finance

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“…However, Ratnovski (2013) studies liquidity and transparency in bank risk management and models a bank liquidity risk in which banks, in case of solvency problems, cannot refinance its short-term liabilities, the solution is that banks can aggregate buffer of liquid assets, or intensify transparency to communicate solvency.…”

Section: Selected Literaturementioning

confidence: 99%

Impact of credit risk (NPLs) and capital on liquidity risk of Malaysian banks

Ali

Hajja

Hussain

2017

Preprint

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We investigate the relationship between bank liquidity risk and credit risk and the impact of bank capital on liquidity risk. Using 19 Malaysian commercial banks data over 2002-2011 and applying dynamic panel data GMM estimation after controlling for bank-specific and macroeconomic variables, empirical results document a positive relationship between liquidity and credit risk and a non-linear U-shaped relationship between bank capital and liquidity risk.

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“…Cash in limited supply may create concerns among investors if demandable deposits are significant or if a bank is heavily reliant on wholesale funding. Liquidity buffers may reassure investors and induce greater management prudence (Billett and Garfinkel, 2004;Calomiris et al, 2012;Ratnovski, 2013).…”

Section: Cash Holdings and Liquidity Riskmentioning

confidence: 99%

“…However, monitoring of incentives may be reduced by the presence of deposit insurance and is hindered by the greater opacity of banking institutions. Cash holdings are considered appropriate ways of reducing information asymmetry (Billett and Garfinkel, 2004), absorbing liquidity shocks (Ratnovski, 2013) and reducing risk-taking incentives (Calomiris et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

Bank Cash Holdings and Investor Uncertainty

d'Udekem

2014

SSRN Journal

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Liquidity and transparency in bank risk management

Cited by 77 publications

References 58 publications

The Basel III net stable funding ratio adjustment speed and systemic risk

The Basel III net stable funding ratio adjustment speed and systemic risk

Impact of credit risk (NPLs) and capital on liquidity risk of Malaysian banks

Bank Cash Holdings and Investor Uncertainty

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