The Research On The Negative Externalities Of Liquidity Risk In Commercial Banks

Liquidity is one of the three principles of commercial bank management.If the improper liquidity management or the long-term accumulation of credit risk and operational risk cannot be effectively controlled,they will eventually turn into a liquidity risk.In case of liquidity risk,a commercial bank,even if it still has a solvency,may be unable to obtain sufficient funds at a reasonable cost in time and lead to bankruptcy.The financial crisis in 2007 proved the vital importance of liquidity to the health of commercial banks and the whole financial market once again.The Basel Accord was further revised and perfected after this crisis.It emphasizes that commercial banks should attach equal importance to the capital scale and capital quality,introduces liquidity supervision indicators,establishes a set of auxiliary monitoring tools,and makes every effort to reduce the liquidity risk of the banking system.The liquidity risk of commercial banks will not only lead to their own bankruptcy,but also will cause huge negative externalities to depositors,peers,entities and even the whole macro-economy through different channels.In this process,each economic entity,which is closely related to the economic business,plays with each other to reduce losses or maximize their own interests.The study of the negative externality of liquidity risk and its game process in commercial banks,can make commercial banks more targeted to prevent,supervise and manage liquidity risk,minimize the negative externality of liquidity risk,and promote China's financial deepening reform as well as the long-term stable and healthy development of macro-economy.Firstly,this paper introduces commercial banks' liquidity risk theory and externality theory,puts forward the definition of negative externality of liquidity risk of commercial banks,and analyzes the negative externalities of commercial banks' liquidity risk to depositors,peers,entities and macroeconomics.Secondly,this paper constructs the deposit game model,the global game model and the credit game model,in order to study the negative externality of the liquidity risk of the commercial bank from the perspective of game theory.Thirdly,this paper selects loan-to-deposit ratio,liquidity ratio and liquidity coverage ratio,to analyze the liquidity risk of 16 listed banks in China.The data show that the overall liquidity risk of commercial banks in China is relatively small,among which the liquidity risk of large commercial banks tends to increase,the liquidity risk of joint-stock commercial banks is relatively large and the liquidity risk of urban commercial banks is relatively low.Then,the panel VAR model is established to study empirically its negative externality.The results show that the liquidity risk of commercial banks has significant negative externality on deposits,loans,interbank interest income and GDP.Finally,combining theoretical analysis with empirical results,the paper puts forward recommendations of the negative externality of the liquidity risk.