Research On The Impact Of Liquidity Indicator On Bank Profitability

Over the few years,with the changes of domestic and international economic and financial circumstances,the business of China’s commercial banks is thriving,showing many different characteristics from the past.Liquidity risk has always been the main risk faced by commercial banks,and the China Banking Regulatory Commission(CBRC)attaches great importance to the liquidity risk supervision of commercial banks.In order to promote China’s banking industry to strengthen liquidity risk management and maintain the safe and steady operation of the banking system,the CBRC released the "measures for the management of commercial banks’ liquidity " on its official website in May,2018,and add three new liquidity indicators such as the Net Stable Funding Ratio(NSFR),High Quality Liquidity Asset Adequacy Ratio,Liquidity Matching Ratio(LMR).Contrast in this background,this paper discusses the three indicators of net stable funding ratio,liquidity ratio and liquidity matching rate,and selection of 38 commercial banks in our country with 2006-2017 annual data,the liquidity indicators of Net Stable Funding Ratio,Liquidity Ratio and the relationship between the commercial bank profitability separately carried on the thorough empirical study.The results show that both the ratio of net stable funds and the ratio of liquidity affect the profitability of commercial banks.The proportion of net stable funds is negatively correlated with the profitability of commercial banks,that is,increasing the proportion of net stable funds will reduce the profitability of commercial banks.The Liquidity Ratio also shows a negative correlation with the profitability of commercial banks,that is,increasing the liquidity ratio will also reduce the profitability of commercial banks.The research in this paper improves the further understanding of the relationship between liquidity risk management and commercial banks’ profitability,helps regulatory authorities more accurately grasp and adjust the direction of supervision,and has important policy implications for improving the liquidity index system.