| In December 2008, the Basel Committee issued the " Proposed enhancements to the Baselâ…¡framework ", which states that The financial market crisis underscores the importance of assessing the potential impact of liquidity risk on capital adequacy in a bank's ICAAP. Senior management should consider the relationship between liquidity and capital. In this context, this paper will focus on liquidity and economic capital to start the related research.This paper first analysis the relationship between economic capital and liquidity depthly. The results show that the allocation of economic capital is a very important component of economic capital managemen. Actually, the allocation of economic capital reflected the "security" and "profit",which are the basic principles of bank management. However, the allocation of economic capital does not take of the needs of liquidty in commercial banks into account. And if the banks can not maintain a certain degree of liquidity, even though the bank still has the ability of settlement, it will also closed. From " banlance of three principles " perspective, if we consider the "liquidity" and "safety" and "profitability" separatedly, it will violate the principle of them. Thus, it is necessary to allocation economic capital under liquidity constraints.In this paper will use the concept of dynamic cash flow mismatch to construct liquidity constraints. This paper will use technical means to quantify the dynamic n cash flow mismatch, so we can forcast the cash flow of commercial bank's in a period. The scale of new business in commercial banks will be subject to the future cash flow in a period. Meanwhile, the scale and structure of new business will be subject to the economic capital quota. On this basis, this paper will design a method to allocation economic capital under liquidity constraints, and use a numerical example to demonstrate the feasibility and practicality of this method. Finally, this paper brings up some available countermeasures and suggestions for how to use this method in our country. |
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