Research On Liquidity Risk Management Of Chinese Commercial Banks

In banking,liquidity is the ability to meet the demand of clients' withdrawing deposit and receiving normal loan at any time.The importance of managing the liquidity risk in bank operation is in essence determined by the time transferring function on the short deposit and long loan of commercial banks and the operational characteristic of high leverage ratio.In recent years,the supervision on liquidity risk has not paid due attention by the commercial banks and the regulatory authority due to the seriously insufficient recognition of the liquidity risk in the global financial market.Besides,with the rapid development of the financial market and the wide application of the new technologies,the deep change of funding channels,product complexity,and business model bring great challenge on the management and supervision of the banking's liquidity risk.Since the global financial crisis broke out,the lacuna of the supervision on the liquidity risk has been recognized as a big defect for the Basel I and Basel II.In Basel II,there are no quantifiable requirements on the liquidity risk supervision as the credit risk,market risk and operational risk have,that is,it is only described and analyzed qualitatively in Pillar II.On one hand,the recognition of the liquidity risk is seriously rare because at that time the global financial market were in the condition of excess liquidity;on the other hand,it is difficult to put the liquidity risk management into the framework of the capital supervision because there were no effective and unified regulatory instruments on the liquidity risk.Therefore,the issue about the regulation on the liquidity risk has not been paid due attention.In this context,the Basel committee launched the Basel III,which not only puts forward the new regulatory capital requirements,Also created a global unified,quantifiable liquidity regulatory standards for the first time,which emphasized the importance of liquidity risk regulation.This thesis studies the management of the liquidity risk among Chinese commercial banks by analyzing the regulatory index on commercial banks' liquidity from the perspective of the Basel Agreement? in order to offer a theoretical reference for commercial banks' liquidity management.The thesis can be divided into seven chapters:Chapter 1 is the introduction.In this chapter,we introduce the research background,research objective and meanings,research condition from home and abroad,research content and methodology,the innovation and limitations.In Chapter 2,we explain the relationship between the liquidity risk management and the Basel Agreement ?.Firstly,we make a brief summary of the liquidity risk management by the commercial banks,that is,we describe the concept of liquidity and liquidity risk,the causes of liquidity risk,the liquidity risk manegemenrt in Chinese commercial banks,andthe theories of commercial banks' liquidity risk management.Then we introduce in detail the internal logical relationship between the liquidity risk management and the Basel Agreement ?,including its relevant content on liquidity risk management,other factors related to liquidity,its impacts on the commercial banks'liquidity management and the managerial practice's counteraction on the Basel Agreement ?.Finally,we draw lessons of the liquidity risk management from Europe and America.In chapter 3,we analyze the situation,problems and reform trend on the liquidity risk management among Chinese commercial banks on the basis of the Basel Agreement? in the following three aspects.In the beginning,we analyze the process of the implementation of the Basel Agreement ?,the developing process on the liquidity risk management by the commercial banks,and their present management system on liquidity risk.Then we analyze theexisting problems of liquidity management faced by the commercial banks at present.Finally,we discuss the reform trend on the liquidity risk management based on the Basel Agreement ? by the commercial banks.In Chapter 4,based on the Basel Agreement ?,we construct the system of commercial banks' liquidity risk management.At first,we show the construction of commercial banks' liquidity risk management system in the following four aspects:external environment,operating,goals,and supervision.The we construct the micro prudent regulation system of commercial banks' liquidity management on the basis of the Basel Agreement III,including four sub-systems:the system of liquidity management based on capital quality,the system of liquidity management based on capital adequacy rate,the system of liquidity management based on leverage rate,and the system of liquidity management based on supervision on liquidity risk.Simultaneously,we construct the macro prudent regulation system of commercial banks' liquidity management on the basis of the Basel Agreement ?,including three sub-systems:the system of liquidity management based on anti-circle capital buffering,the system of liquidity management based on retained capital buffering,and the system of liquidity management based on systematically important banks and their relevant regulation.At last,we have completed to construct the commercial banks' liquidity risk management system based on the Basel Agreement ? consisting of the micro prudent regulation system of commercial banks' liquidity management and the macro prudent regulation system of commercial banks' liquidity management.In chapter 5,we empirically study the liquidity risk management based on the Basel Agreement ? in Chinese commercial banks.By constructing the estimate index for the liquidity risk management,we use the method of factor analysis to evaluate the factual data of the liquidity managerial level.Then on the basis of the factor analysis,we construct the multivariate regression model by using the econometric modeling method.Finally,we come up with the development strategy and specific suggestions based on the empirical results.In chapter 6,we conclude the thesis and make some perspectives.The innovations are as follows:First,by combining normative research and empirical analysis,from the Basel Agreement ? regulator's point of view,we analyze the factors influencing the liquidity management.We are not confined to the implementation of the Basel Agreement.More importantly,we have also examined its managerial deficiencies,and constructed the liquidity managerial mechanism through considering the real situations,thus opening up a new way for liquidity management by the commercial banks.Secondly,the Basel Agreement ?focuses more on the liquidity management from the angle of supervision,which may bring the financial repression.However,in this thesis,we emphasize more on the balance between the profit-gaining and moderate operation by referring the regulatory methods in the Basel Agreement,and form the liquidity managerial method moderately,thus providing new ways for avoiding the liquidity risk and improving performance.Thirdly,we construct the evaluating index for the liquidity risk management and the econometric model.Based on the empirical results,we give our suggestion on the liquidity management for the commercial banks.The conclusions are as follows:The relationship between the scale factor and liquidity factor shows the difference from our common understanding that the larger the scale,the stronger ability to resist risks.Considering the banking's physical truth that the scale of the big five national banks is that large,but their profitability is not obvious and they both have large bad debts for the reason of the system's or other factors' constraints and impacts.Since they lose the national credit support,their liquidity risk will be much higher than other joint-equity banks.Besides,in recent years,the bankruptcy of several large financial institutions in the world warns us that the larger scale the commercial banks have,the less probability the liquidity risk will be.Since there is something wrong with these so-called big financial institutions' cash flow,their large and complex investment and fund relationship may accelerate the bankruptcy.The relationship between asset-operating efficiency factor and liquidity factor is statistically positive in that the commercial banks in China have strong national capital and credit and the public always ignore their profitability due to the strong recognition on national credit.At the same time,although the new financial institutions sprang up in recent years have a good profitability temporarily,they still can not gain larger market for the reason of the short history,small scale,and the people's little acquaintance.However,with the listing of these big five national banks,their profitability will rise and that temporary result will be improved.The relationship between risk-controlling ability and liquidity is statistically negative,which illustrates that the higher level the commercial banks' management,the stronger ability to resist risks.When faced with the liquidity risk,the commercial banks can solve the problem in time and reduce the risk.