A strong liquidity position in the banking industry is of
paramount importance for the smooth functioning of the economy. The failure of
the bank to manage its liquidity results in liquidity risk which further
increases the probability of default (PD) in the banking industry. The aim of
this paper is the analysis of liquidity management policy in order to determine
the level of liquidity risk. Planning of liquidity requirements is important
from the microeconomic aspect because the banks at any moment must respond to
requests submitted by depositors or applications for new loans. Provision of
liquidity is also required from the macroeconomic aspect since this reflects on
the economic and financial stability. Quantitative data for this study was
collected using a questionnaire designed to analyze liquidity risk management,
which would help in the identification and explanation of possible changes in
the banking system in the country. Data collected from the questionnaire was
processed using the SPSS program. Based on the analysis, it is estimated that
banks properly manage liquidity and maintain adequate liquidity reserves to ensure
sufficient funds to meet their commitments on time. Also, the main sources
providing liquidity for banks are the non-term deposits and the issuance of
various securities. However, holding excess liquidity reserves causes the
opportunity cost for banks, but also non-fulfillment of the requirements of the
economy for loans. Therefore, the regulatory bodies should reduce the liquidity
reserve holding. It is recommended for future research studies to expand not
only in Kosovo but also in the CEE countries in general because there is no
such research.
Author(s)
Details
Lumnije
Thaçi
College “UBT”, Prishtina, Kosovo.
Please see the book here:- https://doi.org/10.9734/bpi/bmerp/v2/1343
No comments:
Post a Comment