The Vulnerability Of The Commercial Banks With Liquidity Problems

The U.S.A sub-prime mortgage crisis had been concerned about by the all of worldwide when I was admitted by CUEB and became a graduate. With the American economic shocks, my graduate life has been drawing to end. Each financial crisis is the best negative example for every financial practitioners, especially this one. The reason is that banks played the important role in the process of financial crisis evolved into a real economy crisis. In the past, banking crisis originated in the exchange rate and interest rate risks, but this one originated in the new financial instruments. Thus, somebody can not distinction the concept between the CDS and CDO when analysis the reason for this crisis. There are also some things worth us to attention. For example, the banking crisis's outbreak has three features, concealed, sudden and widespread. Concealed means the bankrupt banks'liquidity (including investment bank) was good before the crisis coming, the sudden means these banks liking a giant with feet of clay when the crisis coming and all of them were collapsed. Widespread means the crisis affected the wide range of world, which can mention the Great Depression in the same breath.FRB has been according to bank's liquidity position to decide whether the bank should be bankrupt in this crisis, then we can think the bank liquidity has important affecting to bank's stable operation. The research focus of this article is the relationship between fragility and liquidity. This article has four chapters.The first chapter is the introduction. This chapter introduces researching background and purposes firstly, and then describing the banking crisis evolving into economic crisis's process in order to statement the important action of the liquidity exchanging in the infection process of bank crisis. It can make us understand clearly to business bank's management and operation in another single. There is less paper to research the relationship between fragility and liquidity, so the rest part of chapter reviews the fragility and liquidity dependently, and then define the concept of fragility and liquidity in this article.The second chapter is the fragility and liquidity model theory analysis. Following the individual bank and bank system's fragility and liquidity, this chapter introduces DD model and AG model respectively. The DD model uses the game theory and asymmetric information theory to explain the reason of bank runs, they think it is the bank's liquidity transfer action deciding the bank's fragility. AG model can be seen as the theory extension of DD model, the key point is the researching of bank system fragility, defined as excess sensitivity to small shocks, or small shocks to the demand for liquidity cause either high asset-price volatility or bank defaults or both.The third chapter is the case analysis. Through analyzing the North Stock and the Washington mutual bank's business model and investment strategy, though all of them were fail in the liquidity contraction. Combination of past bank crisis cases, I think liquidity has the very important action to bank's stable management.The forth chapter is the Chinese business bank fragility and liquidity empirical study. This chapter researches our country's business bank liquidity risk management development history and the present situation. Though there is no dangerous of bank liquidity, there are some potential factors we should pay attention to, especially there is some new features of liquidity crisis's outbreak. Facing this question, the rest part of chapter gives some suggestion to Chinese business bank liquidity management.