Commercial Banks' Liquidity Risk Measurement And Related Issues

Measures of liquidity risk of commercial bank basically reflects the knowing course of bank to liquidity management. And Liquidity measure is precondition & foundation of liquidity risk management of commercial bank. At present, Rapidly development of financial system and financial globalization trend already becomes the cause and drive to evolvement of global financial risk management. Eevery country's bank group depends on product & service innovation and mix-work to adapt to new change. Thereout, New Basel Accord offers more computation methods to banks and there supervisor. In order to make supervisory principle more flexible to reflect the change of bank working environment, and make bank risk control keeps all the time sensitivity to risk movement of financial market.Follow the basic idea of New Basel Accord in this thesis, we use the known foreign &domestic research fruit for reference and we also think of risk management practice of bank system of China to mainly discuss bank liquidity risk's computation problem, especially "liquidity overplus" problem. Then we could bring forward some new idea to study risk computation methods with high risk sensitivity. So we can validate the authenticity of "the liquidity overplus" of bank system of China, and slove the actual problem on bank liquidity risk management and supervision. In bank current practice, Var is the main risk measure for computing capital to cover with all kinds of risk. But Var is criticized by academia, they recommend Coherent Risk Measure include ES,Spectral Risk Measure,Concave Distortion Risk Measure etc. Although CRM overcome shortcoming of Var, it just meet zero-rank stochastic domination rule. In traditional stochastic domination theory, people can not get the risk measure which meets both monotonicity axiom of traditional stochastic domination theory and other three axioms of CRM. So people can not come true risk measure's four functions under the condition of according with value judgement of most finance and supervision institutions which stand by public side. The four functions are: 1,risk compositor and information issuance, 2,risk prevention and control, 3,risk supervision, 4,investment decision and achievement evaluation. In this paper, we made a demonstration analysis about main commercial banks in AnHui province. We use the high-rank lossexpectation risk measure ES⁽ⁿ⁾ of general stochastic domination theory to solve the factual problem of bank liquidity riskmanagement. ES⁽ⁿ⁾ can meet both general stochastic domination ruleand other three axioms of CRM. The primary content and contribution in this thesis as follow:The first chapter is literature summary. First of all, we make a detailed introduction of correlative research fruit of Basel committee about bank liquidity computation and management. And secondly, we make a all around summary and comment about the Measures of liquidity risk which a commercial bank generally adopting and it's up to date development. Finally, we summarize the research background and status quo of academia.On the basis of (R. Franck & M. Krausz, 2004), the second chapter makes a patulous analysis of three economic aspects (Capital Market,Interbank Market,Deposit insurance and Lender of Last Resort of Central Bank system) which have colse relation to bank liquidity provision. In 2.2 section, we analyse the influence of capital market on bank liquidity risk and optimal assets collocation by introduce market liqiudity risk model of (Kyle, 1985), and we make some relevant demonstration analysis.. In 2.3 section, we add interbank market model.. In 2. 4 section, we add deposit insurance model. Finally, we testify: Interbank Market,Deposit insurance system, the same as Capital Market,Lender of Last Resort of Central Bank system, can improve bank liquidity status and increase bank expect profit.The third chapter and the fourth chapter are the core part of this thesis. There are two primary contribution as follow:The first is in the third chapter: For the first time in thisfield, we use Stat. instrument Copula which used to understandingrelationships among multivariate outcomes & High-Level ES Measurein General Stochastic Dominance Theory to measure commercial bankliquidity risk. This is a method which can measure bank solvencyand "liquidity overplus" degree more accurately. We can use thismethod to validate the authenticity of "the liquidity overplus"of bank system of China. Then we made a demonstration researchduring 1997-2006 on liquidity data of commercial banks in Anhuiprovince of China. We find the liquidity of current bank systemof China is strictly superfluous and also eaccurately measure it's degree, then we get a scientific taxis. This method can increasethe discernment of supervision institution and validity of riskcontrol of finance institution. In our model, if use Copula or notmay greatly impact the result of taxis. So Copula have a importantsignificance to the research on bank liquidity computation problem.Through seeking Copula dependence structure among the risk factors,it can not only successfully reflect the actual finance situationof AnHui province, but also improve the method for computingcapital to cover with liquidity risk. The conclusion is very helpful to finance supervision and bank liquidity safety.During demonstration research We also find: For the problem we study, VaR,ES these two low-rank loss expectation risk measures will be wrong under the condition of general stochasticdomination. Whereas ES⁽ⁿ⁾ measure is the high-rank spread of ES measure, it has all the fine character of ES measure, and also is 0～(n + 1) -rank general stochastic domination monotone &consistent risk measure. It can be always right under the condition of general stochastic domination. So it can come true better risk measure's four functions, and the rank more higher, the risk control measure more safer. If finance institution or supervision institution adopt this method, they can increase the validity of risk supervision and enhance the reliability of risk control and decrease the possibility of decision error.The second is in the fourth chapter : We use Quantile Autoregression method to measure and forecast bank liquidity risk on some time point. The leading character of QAR is it's coefficient changing along with Quantile's change. So compare to constant coefficient model, it is more reasonable. This method differs from the third chapter's, which can make a Real-time measure of liquidity risk on some time point and make a forecast on the next point. Compare with Var & Es measure, this method is more logical for risk sort order on some time point.Through demonstration test on these two methods, we can see that they can not only reflect regional economy & finance movement well and truly, but also accurately compute the degree of "liquidity overplus" and "correcting capability" of banks of AnHui province. So supervision institution can find out some banks which problem are very serious, then supervisor will make a choose between keep silence and external interference. Thereout, it provides a operable standard for central bank actualizing monetary policy and for finance supervision institution holding liquidity risk of the whole bank system. So it has a significance for enhancing liquidity risk manament level and keeping away systemic finance risk of bank system of China. Therefore, the third and fourth chapter construct a new scientific system together, which can make a accurate measure of a commercial bank's liquidity risk. This system can not only measure bank liquidity risk in a long time, but also on some time point, even can forecast on the next time point. Demonstration analysis testifies to the validity of the regional applications, this system can be lightly applied to the whole country. So it is highly valuable to money & supervision institutions. This part of content contains the core contribution of this thesis.Because of liquidity gap management is very important to commercial bank effectively manage it's liquidity risk. In the fifth chapter, we use the Longest Run Statistics to research on financial data of commercial banks in Anhui province of China. Then we get hold of durative intensity about capacity to maintain moderation liquidity gap of commercial banks in AnHui province. Our conclusion is: As a whole, the bank system liquidity status of AnHui province is all right. It's P value is 0.94960. So we can consider that the banks of AnHui province run steadily, and the taxis of their ability to keep appropriate liquidity gap is: China Construction Bank,China Citic Bank,China Everbright Bank,Agricultural Bank of China,China Merchants Bank,Industrial and Commercial Bank of China & Bank of Communications,ShangHai PuDong Development Bank,Bank of China. Therefore, we can see that the taxis of the four state-owned banks and the five joint-stock banks is jumbly, there is no circumstance which one side exceeds another side. So there no correlative relationship between proprietary system and bank liquidity risk status. In other words, the capital capital management level of the four state-owned banks is as good as state-owned bank's.The sixth chapter is about to analyzes diversified macro-risk factors which have significant influence on liquidity risk of commercial bank of AnHui province. We will use Gray system method & Non-linear co-integration theory and it's methods to solve this problem. We hope to find the most significant macro-risk factor to it, and We also hope to find the long-range equilibrium relation between macro-risk factors and liquidity risk of commercial bank of AnHui province. Therefore, we can make a test on capacity of eluding macro-economy risk for commercial bank of AnHui province. Our conclusion is: Factors of government finance,foreign trade,consumption,investment have significant influence on liquidity risk of commercial bank of AnHui province. It adequately validates that economy of AnHui province becomes more and more extroverted and it's development largely depend on the investment by government. This do accord with the fact of AnHui province.In the end, the tag is summary on research work of this thesis. And however it have many places need to perfect.