Research On The Liquidity Risks Measurement Of Commercial Banks

Liquidity is the fundamental factor of the banking sector. If the commercial Banksthat is in liquidity shortage can not obtain enough money through liquidating assets orreducing debt in short time. It will affect its profitability of going bankrupt because ofinsolvency. In the US subprime mortgage crisis, the liquidity of financial institutions israpidly disappeared. Financial institutions selling assets will lead to the falling ofassets value and aggravating the liquidity risk. Many financial institutions due toexcessive association, which in turn triggered risk spread, caused the entire financialsystem liquidity difficulties. However, because of the little happen probability ofliquidity risk in daily operation stage, regulators neglect the management of liquidityrisk when the economic situation tended to be relaxed. Liquidity risk became a weaklink in the risk control of banks. Proper management will win enough time for banks todeal with the liquidity risk when the economic and financial environment suddenlychanged or significant event occurs. It will also reduce the possibility of the crisis andguarantee running smoothly of financial system. For post-crisis global banking paymore and more attention to liquidity risk management, senior management andregulators also began to develop and implement more perfect liquidity risk managementsystem. Under the background of interest rate marketization, the establishment of adeposit insurance system，bank withdrawal mechanism and rapid development ofInternet finance, the liquidity risk will become a threat to Chinese banking industrysurvival and become key factors to guarantee the continuous operation. It is necessary toestablish the liquidity risk management system which conforms to the development ofChinese economic and financial situation. Effective liquidity risk prevention,recognition, measurement and control management system can help maintaining thefinancial market confidence to Banks, keeping the bank run smoothly and implementingits own operation. It can also promotes financial servicing the real economy, bysupporting for financial system stability function of the real economy, promotingeconomic growth and prevent financial risks and economic crisis.The fundamental linkof Effective liquidity risk management and prevention is to accurately identify andmeasure liquidity risk. By identifying whether the liquidity risk occurrence and sizemeasurement, we can take a different approach, different methods of management andcontrol efforts. That can ensure the effectiveness of liquidity management, so as to guard against financial risks and maintain financial stability.From the start of commercial banks liquidity risk, the main line of analysis fromtwo aspects of the liquidity risk management and measurement. Research aims todiscovery the liquidity risk characteristics and to create a new measure of liquidity riskapproach on the basis of the existing measurement methods, and thus learned Chinesecommercial banks’ liquidity risk levels and differences.This paper starts with the meaning, classification system, measurement methods ofthe liquidity risk. The first making a classified summary of the measure of liquidity riskfrom three aspects as loss, cash flow and liquidity ratios. Secondly it expounds thetheoretical basis of this article. Thirdly, this paper construct a random liquidity ratiomodel to measure the risk probability of the Chinese12listed banks at2013half-year,and determine the liquidity risk rating. Then the paper analyses the reason of thedifference in the liquidity of banks from the perspectives of asset liquidity, liabilityliquidity and the matching degree of asset and liability. It is found that, there are greatdifferences in the level of liquidity risks between four big commercial banks, the waysto change is increasing liquidity assets. The liability liquidity is low of joint-stock banks,and asset-liability mismatching is serious. To reduce liquidity risk, they should form astable source of funds and a reasonable asset-liability matching.