Research On Interbank Liabilities And Liquidity Risks Of Commercial Banks

Fierce deposit competition forces modern commercial banks to seek diversified financing channels.Interbank funds are favored because of their large scale and high flexibility.In China,interbank liabilities business has experienced two rounds of rapid growth since its rise.Now it has become an important source of funds for commercial banks in addition to deposits.In this process,the purpose of interbank liabilities have gradually changed from managing short-term liquidity to leveraging,expanding scale and increasing profits.However,the underlying liquidity risk cannot be ignored.On the one hand,the mismatch of the term of short-term liabilities and long-term assets can easily create a liquidity gap.On the other hand,the inter-bank capital exchange strengthens the internal links of the financial system and increases the possibility of risk contagion.Actually,the growth of total interbank liabilities in China have slowing down since 2015,and it has a negative growth in 2017.It means that this business has shown a new trend--individual risks hidden in an orderly state.Therefore,it is necessary to study whether interbank liabilities return to the role of liquidity management tools and how to guide and standardize the development of interbank liabilities in the future.In order to verify the hypothesis,this paper chooses the annual data of 168 commercial banks in China from 2013 to 2017 as sample data,measures liquidity risk by liquidity ratio,sets three indicators representing different characteristics of interbank liabilities,which are scale,cost and structure,and adds control variables representing macroeconomic factors and individual characteristics of banks.Secondary terms are added to the basic model to explore the non-linear relationship between the scale of interbank liabilities and liquidity risk.The results are: firstly,within the critical value,more interbank liabilities can effectively reduce liquidity risk,but once it exceeds a certain limit,liquidity risk will rise.So there is an inverted U-shaped relationship between these two variables.Secondly,the rising cost of interbank liabilities will significantly increase the liquidity risk of banks.When it comes to the structure of interbank liabilities,the expansion of traditional business(interbank deposit and interbank borrowing)will increase the liquidity risk,while the expansion of emerging interbank liabilities(sell-back)can alleviate the liquidity risk.Thirdly,this paper finds that large commercial banks can improve their liquidity by increasing interbank liabilities,and there is no "inverted U" relationship.But the interbank liabilities and liquidity of small and medium-sized commercial banks already has an obvious "inverted U" relationship.The main contributions are as follows: Firstly,in the existing literature,the interbank assets and liabilities business are usually regarded as a whole,there are seldom studies separately analyze the relationship between interbank liabilities and liquidity risk.So this paper enriches the relevant research.Secondly,previous studies on interbank liabilities mainly focus on scale,and rarely consider other characteristics.Through the analysis of the internal structure and cost of interbank liabilities,we can give more detailed guidance on how to improve liabilities management of banks and how to optimize supervision.Thirdly,this paper finds that there are differences in the impact of interbank liabilities between large banks and small banks.From the perspective of regulators,they should set different regulatory red lines for different banks.