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The Impact of Liquidity Risk on Bank Profitability: Some Evidence from European Banking Sector
Ivovič, Tomo ; Pečená, Magda (advisor) ; Hanus, Luboš (referee)
This thesis examines the effect of liquidity risk on the profitability of European commercial banks following the full implementation of the Liquidity Coverage Ratio. The aim is to analyse and compare this effect on banks in two different regions of the European Union. Therefore, three countries were chosen to represent the Southern European region, and six were chosen to represent the Northwestern European region. Data from 34 banks were collected for 2018-2022 and split into two datasets. Panel regression methods were utilized, and robustness tests were performed to improve the reliability of the results. This study uses two different measures as proxies for liquidity risk to obtain a more comprehensive understanding of the relationship. Both proxies, the Liquidity coverage ratio, and the Financing gap ratio, were found to be insignificant determinants of profitability in both regions. We also found that the Cost-to-income ratio negatively and significantly impacts banks' profitability in both regions. At the same time, credit risk and bank size showed a significant effect on the profitability of banks in the Southern European region. JEL Classification C12, C33, G21, G28, G32 Keywords banks, liquidity risk, liquidity, profitability, panel regression Title The impact of liquidity risk on bank...
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An Empirical Analysis of Liquidity Situation and Interbank Rates in the Czech Republic during Global Crisis
Lešanovská, Jitka ; Geršl, Adam (advisor) ; von Terzi, Martina (referee)
This diploma thesis focuses on the development of the interbank market liquidity and interest rates in the Czech interbank market with special focus on the period of global crisis. We analyze determinants of the interbank interest rates and their development with respect to the key monetary policy rate. We explain the significant departure of the interbank interest rates from the key monetary policy rate (impairment of monetary policy transmission) during the global crisis by an increase in risk premia on interbank lending. The source of the risk premia is decomposed into the individual components such as liquidity risk, counterparty risk, foreign influence and other factors. Their contribution to the overall risk premia over time during the global crisis is analyzed. We find that the liquidity risk was the key determinant of tensions in the Czech interbank market in the beginning of the global crisis. However, its influence weakened over time while the role of counterparty risk increased. Keywords: interbank market, liquidity, interest rates, crisis, risk premia, credit risk, liquidity risk, counterparty risk JEL classification: G190, G210
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Interest Rate Risk and Liquidity Risk of Banking Books in the Czech Republic
Džmuráňová, Hana ; Tůma, Zdeněk (advisor) ; Tripe, David (referee) ; Witzany, Jiří (referee) ; Kotlán, Viktor (referee)
Univerzita Karlova v Praze Fakulta sociálních věd Institut ekonomických studií Název disertační práce/ Dissertation title Interest Rate Risk and Liquidity Risk of Banking Books in the Czech Republic Anglický překlad / Title in English Interest Rate Risk and Liquidity Risk of Banking Books in the Czech Republic Autor/ka/ Author Mag. Hana Džmuráňová Rok zpracování/ Year 2021 Školitel / Advisor Doc. Ing. Zdeněk Tůma CSc. Počet stran / No. of pages 197 Abstract in English The thesis Interest Rate Risk and Liquidity Risk of Banking Books in the Czech Republic deals with the management of interest rate risk and liquidity risk stemming from the core banking system purpose - the maturity transformation. Across five articles, we provide comprehensive theoretical description, regulatory background, and develop models for embedded behavioural options of client products such as non-maturity deposits, with special focus on savings accounts in the Czech Republic in one of our case studies, or loans with prepayment option. We apply our models on the major Czech and Slovak banks and we calculate the exposure of those banks to interest rate risk in terms of regulatory guidelines. We derive that all banks in our analysis are positioned to benefit when interest rates increase as demand deposits like current accounts are...
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Liquidity management of banks and other financial institutions
Hanzálek, Michal ; Brůna, Karel (advisor) ; Obešlo, František (referee)
Diploma thesis focuses on liquidity risk management of commercial banks in the Czech banking market in 2002-2015. This main goal is achieved through a comprehensive analysis within a framework that uses several different methods. A theoretical framework for bank liquidity management is drawn up for a theoretical evaluation, summary of the current literature and a summary of the regulatory framework including the newly introduced Basel III requirements and indicators is put together. The research part is focused on assessing the development and current state of liquidity of Czech banks by analyzing of liquidity ratios and regression analysis of panel data. The level of liquidity and the size of the liquid pillow is judged to be sufficient and stable from the results of the individual analyses. The net position of Czech banks on the interbank market on an international scale also reflects a good level of liquidity. The major determinants of Czech bank liquidity in the period under review were mainly capital adequacy, bank size, loan portfolio quality, growth rate of GDP and interest rates.
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Building Societies in Low Interest Rate Environment
Hanzlík, Petr ; Džmuráňová, Hana (advisor) ; Baniar, Matúš (referee)
The aim of this thesis is to analyse the impact of low interest rate environment in the Czech Republic in recent years on the sector of building societies as a specific segment of the financial market. First part of the thesis consists of description of main characteristics of building savings and building societies, e.g. their historical development, with special focus on main types of risk the building societies face. In the second part the impact of changing market interest rate on outstanding volumes of deposits in building societies is analysed. The analysis is conducted through simple time series models estimated by OLS. Final part includes comparison of demand for building savings loans with demand for mortgages as well as consideration of the development of profitability of the sector of building societies in recent years. Powered by TCPDF (www.tcpdf.org)
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Multi-agent Network Models of Financial Stability
Klinger, Tomáš ; Teplý, Petr (advisor) ; Tripe, David (referee) ; Stavárek, Daniel (referee) ; Jakubík, Petr (referee)
The thesis focuses on banking regulation and on the nexus between financial sovereign crises. After illustrating the main mechanisms on the recent financial crisis, we construct several multi-agent network models of a financial system for testing its stability under different parameters. In the first part, we focus on the rationale for banking regulation and we describe its development including the recently introduced Basel III measures. The main conclusion of this part is that regulation is to a large extent influenced by the banks and it does not always secure financial system stability. In the second part, we build an agent-based model which enables us to simulate the impacts of various types of negative shocks given various settings of the banking system and the regulatory environment, including the capital and liquidity measures. Our simulations show firstly that sufficient capital buffers are crucial for systemic stability, secondly that the discretionary measures have little effect once a crisis breaks out and thirdly that liquidity measures are a relevant regulatory tool. In the third part, the model is extended so that it allows for testing effects of state support on systemic stability is tested with various parameter settings in Monte Carlo simulations and for testing of feedback loops in which...
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Liquidity risk under Basel III in the EU
Mošnová, Alžběta ; Teplý, Petr (advisor) ; Doležel, Pavel (referee)
In order to address the deficiencies in the banking regulation revealed by the recent financial crisis the Basel III introduces two minimum standards for funding liquidity, Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The goal of this thesis is to analyze whether the NSFR is defined optimally or whether the Basel Committee on Banking Supervision (BCBS) will be forced to relax NSFR conditions similarly as happened by the LCR. Based on the approximation of the NSFR between 2007 and 2012 for a sample of 3 128 European banks we test the ability of banks to satisfy the NSFR. Our results suggest that the European banks have not started to converge to the NSFR yet. Despite this fact they should not have problems with meeting this requirement as 40.3% of banks in our sample would have already satisfied the NSFR in 2011. A Probit model analysis suggests that the NSFR requirement will decrease the probability of bank defaults and therefore increase the stability of the banking sector in the future which proves that the NSFR is correctly specified. Moreover, a simple stress testing shows that the stability of the system would not be improved anymore if the NSFR was defined more strictly. The current version of the NSFR therefore seems to be optimal and in our opinion should be...
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Systemic risk and sovereign crises: modelling interconnections in the financial system
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on the link between financial system and sovereign debt crises through sovereign support to banks on one hand and banks' exposures to weak sovereigns on the other. After illustrating the main relationships on the recent financial crisis, we construct an agent-based network model of an artificial financial system allowing us to analyse the effects of state support on systemic stability and the feedback loops of risk transfer back into the financial system. First, the model is tested with various parameter settings in Monte Carlo simulations and second, it is calibrated to the real world data using a unique dataset put together from various sources. Our analyses yield the following key results: Firstly, in the short term, all the support measures improve the systemic stability. Secondly, in the longer run, the effects of state support depend on several parameters but still there are settings in which it significantly mitigates the systemic crisis. Finally, there are differences among the effects of the different types of support measures.
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Systemic risk and sovereign crises: modelling interconnections in the financial system
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on the link between financial system and sovereign debt crises through sovereign support to banks on one hand and banks' exposures to weak sovereigns on the other. After illustrating the main relationships on the recent financial crisis, we construct an agent-based network model of an artificial financial system allowing us to analyse the effects of state support on systemic stability and the feedback loops of risk transfer back into the financial system. First, the model is tested with various parameter settings in Monte Carlo simulations and second, it is calibrated to the real world data using a unique dataset put together from various sources. Our analyses yield the following key results: Firstly, in the short term, all the support measures improve the systemic stability. Secondly, in the longer run, the effects of state support depend on several parameters but still there are settings in which it significantly mitigates the systemic crisis. Finally, there are differences among the effects of the different types of support measures.
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