Theory and regulation of liquidity risk management in banking | Zendy

Enzo Scannella | Zendy

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Theory and regulation of liquidity risk management in banking

Author(s) -

Enzo Scannella

Publication year - 2016

Publication title -

international journal of risk assessment and management

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.191

H-Index - 24

eISSN - 1741-5241

pISSN - 1466-8297

DOI - 10.1504/ijram.2016.074433

Subject(s) - liquidity risk , accounting liquidity , liquidity crisis , market liquidity , liquidity premium , funding liquidity , business , financial risk management , financial system , market impact , risk management , finance , order (exchange) , market microstructure

Liquidity risk is now more important than it used to be in the past. The financial crisis has emphasised the importance of liquidity risk to the\udfunctioning of banking and financial system. The paper presents a theoretical and regulatory investigation of two types of liquidity risk: funding liquidity risk and market liquidity risk. The paper analyses the different approaches to measure the impact of funding and market liquidity risk in the economics and management of banks. The paper provides also an analysis of the organisational implications of the asset and liability management perspective of liquidity risk. Liquidity risk does not need to be covered by equity but by an adequate volume of liquid assets and highly liquid securities. This is the reason why the\udregulation of the liquidity risk in banking is focused on liquidity ratio-based financial constraints

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