Research On The Effectiveness Of Liquidity Risk Control Indicators For Commercial Banks In China

The outbreak of the financial crisis exposed the huge liquidity risk hidden in the original capital regulatory framework.After summarizing the shortage of liquidity in commercial banks exposed in the financial crisis and the regulatory practices from various countries,the Basel Committee has introduced Liquidity Coverage Ratio(LCR)and Net Stable Funding Ratio(NSFR)in Basel III.These two quantitative indicators aimed at measuring the liquidity risk of commercial banks more accurately,pointing out a new direction in the management of liquidity risk for commercial banks throughout the world.This paper mainly studied the liquidity risk of commercial banks in China from the perspective of economic cycle.Based on the qualitative analysis of the reform and implementation of the liquidity risk supervision on commercial banks,the author had calculated LCR and NSFR of 48 Chinese commercial banks of different sizes,in order to measure the regulatory effectiveness of liquidity risk indicators.From the results of empirical analysis,the average liquidity level of Chinese commercial banks in 2007-2017 was generally higher than the regulatory requirements.The effectiveness of the new indicators from Basel III was generally better than the traditional ones,while NSFR was the best.However,the new indicators also showed the characteristics of pro-cyclicality.Both the authorities and commercial banks need to deal with the problem.