The impact of the Basel III liquidity ratios on banks: Evidence from a simulation study

Grundke, Peter; Kühn, André

doi:10.1016/j.qref.2019.02.005

Cited by 21 publications

(17 citation statements)

References 20 publications

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“…However, our methodology is much broader that incorporates both market and accounting based estimates of default. Moreover, most of the prior distress assessments using stress testing like ( Busch, Koziol, & Mitrovic, 2018 ; Khan, Rizvi, & Sadiq, 2018 ; Naqvi, Rizvi, Uqaili, & Chaudhry, 2018 ; Grundke & Kühn, 2020 ; Soula, 2017 ) are in the context of banks. Therefore, our perspective of stress testing for the solvency of non-financial firms is a unique and significant value addition in the body of related literature.…”

Section: Introductionmentioning

confidence: 99%

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Mirza

Rahat

Naqvi

et al. 2023

The Quarterly Review of Economics and Finance

142

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Highlights A decline of market capital from Covid-19 will increase the default likelihood. The mining, construction and retail sectors are most vulnerable to market shock. Given a moderate deterioration in economic profile, a tax deferral is sufficient. For exacerbating shocks, debt and equity support is essential to avoid a meltdown.

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Section: Introductionmentioning

confidence: 99%

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Mirza

Rahat

Naqvi

et al. 2023

The Quarterly Review of Economics and Finance

142

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“…periods but at the cost of lower profitability. Grundke & Kühn (2019) find that a higher proportion of high quality and liquid assets leads to decreasing net incomes and bank equity return.…”

mentioning

confidence: 90%

The Impact of Net Stable Funding Ratio on Bank Performance and Risk Around the World

Setiyono

Naufa

2021

BEMP

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This study examines whether liquidity, as measured by net stable funding ratio (NSFR), impacts bank performance and risk. Based on an annual panel data set consisting of 2,909 banks from 127 countries, we find that NSFR reduces both performance and risk. These results are uniquely different in the robustness analysis under various settings (non-linear relationships, high versus low NSFR, and conventional versus Islamicbanks). Overall, NSFR implementation brings benefits in the form of risk reduction rather than performance improvement to banks around the world.

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“…It is expected by regulators that the LCR will have a negative effect on the financial performance of banks, specifically through the reduction of earnings (EBA 2015). This is partly evidenced by Grundke and Kühn (2019) who argue that while "the reduction of maturity transformation can effectively close liquidity gaps within one year, while this comes at a cost of a higher frequency of negative net cash flows above one year". The argument here being that the reduction of maturity transformation increases liquidity within the one-year horizon at the cost of more frequent losses on assets with a maturity of more than one year, ultimately negatively impacting the financial performance.…”

Section: Bank Operations Business Model and Profitabilitymentioning

confidence: 99%

Liquidity risk regulation and its practical implications for banks: the introduction and effects of the Liquidity Coverage Ratio

Tammenga¹,

Haarman²

2020

MAB

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Following the financial crisis, quantitative liquidity risk regulation was introduced by means of the Liquidity Coverage Ratio (LCR). This literature study aims to investigate whether the introduction of the LCR leads to better liquidity risk management in banks. It elaborates on the drivers and definition of liquidity risk as well as the history, benefits and goals of this regulation. It also delves into the exact composition of the ratio and the assumptions used. The impact on bank lending as well as banks' business model and risk management is addressed, as well as the interaction with monetary policy operations and capital regulation. This paper then describes the operational differences that were observed after the implementation, and behavioral aspects. We also address the Net stable Funding Ratio (NSFR) and the discussion on interaction between the two indicators and possible redundancy. We have found that the introduction of the LCR leads to better management of liquidity risk for most financial institutions, but more harmonious implementation throughout the sector could reduce liquidity risk even further.

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The impact of the Basel III liquidity ratios on banks: Evidence from a simulation study

Cited by 21 publications

References 20 publications

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

Impact of Covid-19 on corporate solvency and possible policy responses in the EU

The Impact of Net Stable Funding Ratio on Bank Performance and Risk Around the World

Liquidity risk regulation and its practical implications for banks: the introduction and effects of the Liquidity Coverage Ratio

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