Bank Liquidity and the Global Financial Crisis (eBook)

The Causes and Implications of Regulatory Reform

Laura Chiaramonte (Autor)

eBook Download: PDF

2018 | 1. Auflage
XXIII, 213 Seiten
Palgrave Macmillan (Verlag)
978-3-319-94400-5 (ISBN)

Infos

One of the lessons learned from the Global Financial Crisis of 2007-9 is that minimum capital requirements are a necessary but inadequate safeguard for the stability of an intermediary. Despite the high levels of capitalization of many banks before the crisis, they too experienced serious difficulties due to insufficient liquidity buffers. Thus, for the first time, after the GFC regulators realized that liquidity risk can jeopardize the orderly functioning of a bank and, in some cases, its survival. Previously, the risk did not receive the same attention by regulators at the international level as other types of risk including credit, market, and operational risks. The GFC promoted liquidity risk to a significant place in regulatory reform, introducing uniform international rules and best practices. The literature has studied the potential effects of the new liquidity rules on the behaviour of banks, the financial system, and the economy as a whole.

This book provides a comprehensive understanding of the bank liquidity crisis that occurred during the GFC, of the liquidity regulatory reform introduced by the Basel Committee with the Basel III Accord, and its implications both at the micro and macroeconomic levels.

Laura Chiaramonte is Associate Professor in Banking and Finance at Università Cattolica del Sacro Cuore of Milan, Italy. She gained her Bachelor's in Business Economics and PhD in Business Administration from the University of Verona, Italy. She has been working as a visiting researcher at the Cass Business School, City University of London, UK since 2010. Her main research includes the role of bank credit default swaps (CDSs) in the financial crisis of 2007-9, the role of cooperative banks in promoting bank stability, the reliability of the Z-score in predicting bank failure, and the role of the Basel III capital and liquidity ratios in reducing bank distress phenomena. Her research has been published in journals, such as The European Journal of Finance, The British Accounting Review, European Financial Management, and Financial Markets, Institutions and Instruments.

Inhalt

Foreword 7
Contents 10
About the Author 13
Acronyms and Abbreviations 14
List of Figures 17
List of Tables 18
Chapter 1 Introduction 19
Chapter 2 The Concept of Bank Liquidity and Its Risk 23
2.1 Definition of Bank Liquidity 23
2.1.1 Central Bank Liquidity 24
2.1.2 Funding Liquidity 25
2.1.3 Market Liquidity 26
2.2 Liquidity Risk: Definition and Multidimensionality 27
2.2.1 Central Bank Liquidity Risk 32
2.2.2 Funding Liquidity Risk 33
2.2.3 Market Liquidity Risk 35
2.3 Liquidity Interconnections in Normal and Turbulent Periods 38
2.4 The Linkages Between Liquidity and Solvency 43
2.5 The Relationships Between Liquidity Risk and Other Typical Bank Risks 45
2.6 The Aggravating Factors of Liquidity Risk 46
References 49
Chapter 3 The Bank Liquidity Issues During the Subprime Crisis 53
3.1 The Subprime Crisis 53
3.1.1 The Origin 53
3.1.2 Triggering Factors 59
3.2 Bank Liquidity Problems During the Subprime Crisis 61
3.2.1 The Characteristics of the Banks Most Affected by the Liquidity Crisis of 2007–2009 61
3.2.2 The Relationship Between Liquidity and Solvency Problems and Their Impact on Bank Stability 64
3.2.3 The Main Lessons from the GFC with Particular Reference to Bank Liquidity 66
3.3 Liquidity Crises: Common Features and Some Prevention and Management Policies 68
References 75
Chapter 4 The Role of Central Banks and the Interbank Market in Managing Bank Liquidity During the Global Financial Crisis 80
4.1 Central Banks, the Interbank Market and Bank Liquidity Management 80
4.2 The Liquidity Management Instruments of Leading Central Banks 83
4.3 The Monetary Policy Actions Used by Leading Central Banks in Response to the GFC 88
4.4 The Role of the Interbank Market in Financial Crises: Theories and Empirical Evidence 99
4.5 The Functioning of the Interbank Market During the Financial Crisis 107
References 112
Chapter 5 Bank Liquidity Regulation Before the Global Financial Crisis 115
5.1 Liquidity Risk Management: Regulation Before the Financial Crisis 115
5.2 The Building Blocks of the Liquidity Risk Management Process 118
5.2.1 The Liquidity Governance Model 118
5.2.2 The Operating Limits System 122
5.2.3 Liquidity Risk Measurement 124
5.2.4 Policies and Operational Levers 128
5.2.5 Control Activities 134
5.2.6 Internal Communication and Disclosure 136
5.3 The Role of the Supervisors 140
References 144
Chapter 6 The New International Liquidity Regulatory Framework for Banks 146
6.1 Liquidity Risk: Regulatory Issues 146
6.2 Common Principles for Sound Liquidity Management and Supervision 147
6.3 The Minimum Liquidity Standards of Basel III 150
6.3.1 The Liquidity Coverage Ratio 151
6.3.2 The Net Stable Funding Ratio 167
6.4 Monitoring Tools to Assess Liquidity Risk 175
References 180
Chapter 7 The Implications of Basel III Liquidity Regulatory Reform 181
7.1 Introduction 181
7.2 Possible Strategies for Banks to Meet Basel III Liquidity Ratios: Costs and Benefits 181
7.3 An Empirical Literature Review of the Impact of the Liquidity Requirements on Bank Behaviour 186
7.4 Bank Compliance with Basel III Liquidity Ratios: An Overview of Quantitative Impact Studies 192
References 201
Chapter 8 Conclusion 203
Reference 205
Index 206

Produkt-Details

• Erscheint lt. Verlag: 9.7.2018
• Reihe/Serie: Palgrave Macmillan Studies in Banking and Financial Institutions
• Zusatzinfo: XXIII, 200 p. 10 illus.
• Verlagsort: Cham
• Sprache: englisch
• Themenwelt: Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre
• Schlagworte: Banking • banking regulation • Bank Liquidity • Bank liquidity risk • Basel III • European banking • Financial Crises • Financial Crisis • liquidity • solvency
• ISBN-10: 3-319-94400-2 / 3319944002
• ISBN-13: 978-3-319-94400-5 / 9783319944005