Study On The Impact Of Iiquidity Creation And Profitability On The Liquidity Risk Of Commercial Banks

Since the outbreak of the global liquidity crisis in 2008,the liquidity risk caused by the temporary liquidity shortage made Lehman Brothers to go bankruptcy.And the largest commercial bank Dexia Bank in Belgium,due to the outbreak of liquidity risk,it is inevitable to be split.Therefore,it is not hard to find liquidity risk management of commercial bank is vital to the stable operation of commercial banks.The Basel Committee announced two indicators for the liquidity regulation of commercial banks in Basel III:liquidity coverage and net stable capital ratio,after Banking Insurance Supervision and Administration Commission of China announced the newly revised"Liquidity Risk Management Measures for Commercial Banks"(hereinafter referred to as the"Liquidity Measures"),and three quantitative indicators for the liquidity risk supervision of commercial banks were announced to prevent the recurrence of the global liquidity crisis.The process which commercial banks use liquidity liabilities to finance illiquidity assets is called liquidity creation,and in the process,excessive liquidity creation can lead to serious maturity mismatches,serious term mismatch is an important reason for the liquidity risk of commercial banks.One of the motives for liquidity creation is profit,and profitability is one of the operating principles of commercial banks,and therefore,this paper studies the liquidity risks faced by commercial banks based on the perspective of liquidity creation and profitability,and get conclusion through empirical research,and provide relevant policy recommendations about how to improve the liquidity risk management of commercial banks.Firstly,this paper summarizes the domestic and foreign literatures on liquidity creation,profitability and liquidity risk of commercial banks,followed by an overview of liquidity creation,profitability and liquidity risk of commercial banks,respectively.And the measured indicators were listed for liquidity creation,profitability and liquidity risk of commercial banks,and described using sample data of 19 commercial banks.Subsequently,relevant theoretical analysis of liquidity creation,profitability and liquidity risk of commercial banks was made.Secondly,based on the panel data of China 19 listed commercial banks from 2008 to 2017,the empirical analysis of the full sample and sub-samples get the following conclusions:First,when using the full sample data of 19 listed commercial banks analyzing the impact of liquidity creation on the liquidity risk of commercial banks,the relationship between liquidity creation and liquidity risk of commercial banks shows a significant positive correlation.When only considering the impact of profitability on liquidity risk of commercial banks,there is a significant negative correlation between the two.When considering the impact of the liquidity creation and profitability on liquidity risk of commercial banks in the model,the sign of the regression result is consistent with the model of considering the only one variable,and the coefficient before the profitability changes only slightly,but the coefficient before the liquidity creation has produced a large change.Second,the results of the sub-samples regression of the BOC,ABC,ICBC,CCB and BOCM show that the greater the liquidity of unit assets is created when other variables are controlled,the greater the liquidity risk faced by commercial banks,and the positive impact is relatively large.The regression results show a negative correlation between profitability and liquidity risk of commercial banks,but this negative correlation is not significant.Third,the regression results of 10 joint-stock commercial banks and 4 urban commercial banks as sub-samples show that there is a significant positive correlation between liquidity creation and liquidity risk of commercial banks,but the degree of impact is small compared with the five major banks,and there is a significant negative correlation between profitability and liquidity risk of commercial banks.Then the author has made further analysis on the differences in the results of the empirical regression from the perspective of bank scale,business status and national policies.Finally,on the basis of theoretical analysis and empirical analysis,the author proposes policy recommendations for liquidity risk management of commercial banks from three aspects:liquidity creation,profitability and how to comprehensively manage the liquidity risk of commercial banks:Banks should reduce the degree of maturity mismatch,improve the quality of loans and improve the sources of financing sources;Banks should coordinate the relationship between profitability and risk-taking while improving profitability;Improve the liquidity risk management system of commercial banks and strengthen macro-prudential supervision to comprehensively manage the liquidity risk of commercial banks.