The Measurement And Control Of Liquidity Risk Of The Commercial Bank

Commercial bank is the core of money market. It is the main part in many countries' financial system because of its multitudinous organization and its abundant capital. As the biggest offer of liquidity, commercial bank play a great role in stabilizing economic overall situation and strengthening confidence of general public. Because commercial bank deals in financial asset and financial liability and regard interest as its objective, the risk of commercial bank is more than that of ordinary industry and commerce. Further more, liquidity risk is one of the main risks in commercial bank and is one of the risks that will result in great loss. Accordingly, the measurement and the control of liquidity risk are important to commercial bank.On the basis of the literature review, the article first researches the causation and influencing factors. Because the uncertainty of the source and the using of funds and the contradiction between liquidity and interest, liquidity risk is certain to exist in commercial bank. Influencing factors of liquidity include asset and debt structure, the center bank policy, degree of money market development, credit risk and fluctuation of interest rate.On the liquidity risk measurement, the article proceeds with forecast of liquidity risk. There are two methods that are the source and uses of funds approach and structure of funds. Then, the methods of measurement of liquidity are summed up. They are liquidity index, the degree of deposit concentration, the balance and demand of funds and finance index of liquidity. Subsequently, based on cash flow and duration, two new methods of measurement of liquidity are brought forward. The idea of cash flow bases on the simplification of fund structure as deposit and loan flows and give the probability of emergence of liquidity risk. The idea of duration bases on theaverage maturity of asset and liability and has the average maturity balance of asset and liability as the measurement of liquidity.With regard to the control of liquidity risk, the article proceeds with three mechanisms of control of liquidity risk that are reserve demand, deposit insurance and eventual accommodator. Then, basing on the analysis of structure of asset and liability and the matching between asset and liability and regarding maximizing interest as objective, the article put forwards some steps about control of liquidity risk.