Reevaluate The Effect Of Liquidity Framework In Basel ?

The liquidity risk regulation of commercial banks is an important breakthrough in Basel?,and an indispensable part of current risk management framework as well.Since the liquidity framework is supposed to be complete next year(2018),a reevaluate on the effect of Basel ? liquidly risk regulation framework is extremely urgent.Complied with the relevant requirement of Basel ?,China Banking Regulatory Commission(CBRC)issued a "Commercial Bank Liquidity Risk Management Approach(trail)",which proposed specific liquidity requirements,including the Liquidity Coverage Ratio(LCR)of Basel ?,for supervision purpose.However,the Net Stable Funding Ratio(NSFR),a more objective and accurate liquidity supervisory ratio proposed by Basel ?,has failed to be included in China's liquidity regulation framework.From the regulatory perspective,NSFR and its possible effect are worthy of attention and research.The purpose of this paper is to investigate the effect of the liquidity framework in Basel? at this current critical point of time using comparative analysis method,qualitative analysis method and the practice investigation method.The sample of this paper are the financial data from 2003 to 2015,collected via Bankscope database,of three groups of banks:banks in China with an asset size more than 200 billion yuan(the end of 2015 data),global banks with top 100 assets(the end of 2015 data,banks in China and policy banks excluded)and global systemically important banks(defined by Bankscope database).With reference to the related classical research framework and the latest research design as well,this paper makes classifications of asset and liability categories and assumptions of associated weights according to the latest regulatory standards released by Basel Committee on Banking Supervision(BCBS)in October 2014.Every year's average NSFR of each groups are calculated and the results are used as practical effects of Basel ? liquidity regulation from both domestic and global perspectives.Further,the possible effects and potential problems of introducing NSFR as a regulatory indicator of liquidity risk are discussed with policy recommendations.The results of this paper show that the NSFR of domestic banks reached 119.90%at the end of 2015 with a compliance rate of 96.43%;the NSFR of total assets top 100 banks globally and G-SIBs are 110.14%and 121.54%respectively,while the compliance rate are 69.57%and 76.92%.This paper believes that the NSFR of banks in China is of higher average and compliance rates as well than banks globally,reflecting a better effect of liquidity risk management in China.Since this paper figures out that annual NSFR in China and the international banking market present a similar change trend,this paper suggests that the process of adding NSFR in current regulating framework in China could refer to international experience.But because of differences in accounting standards,information disclosure mechanism,bank assets and liabilities structure,regulatory framework,this process should be carefully assessed after comprehensive consideration.According to research results,analysis and discussion,this paper presents several policy suggestions on the improvement of liquidity risk management system and the introduction of NSFR in China:improve the information disclosure mechanism to ensure the accuracy of calculation in terms of NSFR and other liquidity indicators;prudently adjust the weights of NSFR to enhance the applicability of indicators to banks in China;coordinate other indicators to improve the synergistic effect of liquidity regulatory system;and implement related supporting policies to support the reform of banking management system.The innovations of this paper are as follows:Firstly,this paper systematically summarizes the results of relevant literature and researches,and discusses the effect of Basel III liquidity regulation from both domestic and international perspectives.It which is an important breakthrough with a certain degree of innovation that this paper adds the international status into consideration when making research on liquidity regulation in China,providing more comprehensive interpretation and more systematical analysis of the NSFR and its possible effect if introduced into current regulatory framework among banks in China.Secondly,the research framework is designed according to the latest regulatory standards released by the BCBS and classical literature,and can make NSFR comparable although different accounting standards are applied in China and global banks.It is of certain importance to this field of research.Thirdly,this paper uses the accounting data of domestic banks,international banks with top 100 assets,and global systematically important banks(G-SIBs),to figure out the NSFR from 2003-2015 of each group respectively.In other words,the latest regulatory requirements and the longest available data are used in this paper for the regulators' reference by providing theoretical summary,data support and policy recommendations,which to a certain extent,filling the gaps in this study.