Management of banking institutions liquidity

Economic Annals-XXI: Volume 126, Issue 1-2(2), Pages: 27-30

Citation information:
Yevenko, T. (2013). Management of banking institutions liquidity. Economic Annals-XXI, 1-2(2), 27-30. https://ea21journal.world/index.php/ea-v126-08/

Tatyana Yevenko
PhD Student,
Finance Department,
National University of Life and Environmental Sciences of Ukraine, Kyiv, Ukraine
TatEvenko@mail.ru

Management of banking institutions liquidity

Abstract. Today, Ukraine’s economy is particularly acute problem of ensuring financial stability of banks. The global financial crisis has adversely affected the development of all the banking systems of the world. Ukraine is no exception. Domestic banks are faced with a lack of liquidity in the crisis, though the National Bank of Ukraine was forced to introduce a moratorium on the withdrawal of deposits. As a result of termination of credit from the end of 2009 the banks has felt the excess liquidity and unbalanced resource base, which negatively affects the profits of the bank. Because of these problems, in our view, banks have recently begun to pay increasing attention to increasing of liquidity, which is key to the financial stability of the banking system and the country as a whole.

Depending on the nature of liquidity gap, it can be positive (a source of liquidity excesses amounts of its usage) or negative (shortage of liquidity). In case of excess liquidity, money should be invested in profitable assets, and if it in deficit the cheapest available sources need to be attracted.

Effective liquidity management can reduce the likelihood of serious problems. For this reason, the analysis of liquidity requires bank management to not only measure the liquidity position of the bank on a regular basis, but also conducted an analysis of what is likely financing needs under various scenarios, including adverse conditions.

Thus, the bank is liquid if it has access to funds that could be involved at the right price and at the very moment when they are needed. This means that the bank either has the necessary amount of liquid assets, or can easily obtain them by borrowing or selling assets.

Keywords: Liquidity Management; Bank; Liquidity; Liquidity Position; Liquidity Ratios; Adequate Bank Liquidity; Excess Liquidity; Lack of Liquidity

JEL Classification: G21

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Received 16.01.2013