The Measurement And Management Of Liquidity Risk In Commercial Banks

The Basel committee on banking supervision endorsed the publication of the"International Convergence of Capital Measurement and Capital Standards: a Revised Framework"in June of 2004, which improved the management and measurement of credit risk, market risk and operational risk. But there were not mention the liquidity risk. Liquidity risk is one of the most important risks that financial institution face, but the study of methods of measure liquidity risk is still at an embryonic stage. VaR models that extensively applications lack a treatment of liquidity risk. Neglecting liquidity risk may lead to an underestimation of overall risk and misapplication of capital for the safety of financial institutions.The liquidity risk of commercial banks included market liquidity risk and funding liquidity risk. The banks hold many assets like bonds, commercial papers, and especially, for all-round banks take stocks yet. When banks want to sell these assets, but because of inadequacy of market depth or discontinue of market liquidity, and result theses assets can't sell according to the market price. This is market liquidity risk. Another one is related to the situation of bank's total funds, and is called funding liquidity risk or cash liquidity risk, which is refer to risk that arise banks have no ability to raise funds in order to pay matured debt because of lack funds.This paper analyzed the characteristics of liquidity risk, mechanism and relationship with other risks. Then, we investigated the methods of measurement of liquidity, and analyzed the liquidity risk of stocks and bonds on the basis of BDSS. For the loans, we can deal with from two aspects: the time structure and securitization of credit. Furthermore, we put forward a train of thought that measurement credit risk, market risk, operational risk and liquidity risk synthetically.Using the experiences of international banks for reference, we also analyzed situation of our country's liquidity risk, we selected 7 listed banks, and in which 2 state banks and the other are joint-stock banks. Firstly, we analyzed the resources of liquidity. Now, the management and measurement of liquidity risk of banks in our country are major through index, so secondly, we choice some quotas and 14 banks to analyze the situation of liquidity risk. Finally, this paper carried on hierarchical cluster analysis according to the six indexes.From the analyses above, we can see that there exist many problems in the management of liquidity risk. From the internal of banks, there are some problems like the weak of awareness in liquidity risk management; short of ALM; simple management in liquidity risk and so on. From the external of banks, the supervision of liquidity risk has some short comes.And then we propose our idea that builds a system for the liquidity risk management. Specifically, include the organize system, the function system and management information system.In brief, the liquidity risk is a major risk that banks face, even though, the Baselâ…¡don't include the liquidity risk into the regulatory capital, but for banks, the liquidity risk should not ignore in the whole risk management.