Ways to regulate bank liquidity by managing assets and liabilities

Insufficient level of liquid funds in banking activity is the main reason for its financial difficulties and, accordingly, the appearance of a shortage of payment funds. The article describes various methods of liquidity management. One of them is the optimal placement of your own and equivalent funds. The method requires maintaining a certain level of highly liquid assets. This method is used by banks in an undeveloped financial market. The second method of managing liquidity is to regulate the volume and structure of liabilities, which are secured by attracting external loans. This method is used by large banks. The article notes that each of these methods has liquidity management tools. In foreign countries, assets are classified into primary and secondary reserves. Secondary reserves are a complement to primary. The article shows that a large amount of money on deposit accounts of commercial banks can lead to rampant inflation. To regulate the money supply, the Central Bank conducts a policy of credit expansion or credit restriction. The authors note, a more effective tool is an increase or decrease in the base rate (discount), the use of which reduces or increases the excess reserves of banks and their ability to create new money. The participation of the Central Bank in the open market for the purchase and sale of securities, the establishment of minimum reserve requirements for commercial banks also allows you to reduce or increase the creation of new deposits. The authors show that the regulation of commercial banks' liquidity management methods maximizes revenue and minimizes banking services.