Please use this identifier to cite or link to this item: https://www.um.edu.mt/library/oar/handle/123456789/10171
Title: The importance of managing liquidity risk in the light of the current financial crisis
Authors: Borg, Charlene
Keywords: Liquidity (Economics)
Financial crises
Bank liquidity -- Malta
Risk management -- Malta
Issue Date: 2014
Abstract: An important source of financing for many businesses remains loan financing from the banking sector. In order to evaluate the soundness and reliability of the financial sector, a bank's stakeholders must consider information on different types of risks and also how changes in this information are managed. Liquidity risk is one of the crucial risks to financial institutions since it can result in major problems if not accounted for and managed well. This risk is particularly prominent in crisis times since illiquid financial markets make it difficult for financial intermediaries to find alternative sources of finance, to rollover liabilities at reasonable rates and to reduce their maturity mismatches. In order to avoid these situations, monitoring and effective management are required. In this dissertation, an Augmented-Dickey Fuller test was performed to test for stationarity in the variables. Also, an econometric regression model was run for three main banks in Malta and it was identified that the main variables affecting liquidity risk were the bank size and debt to equity. However, for Lombard, the outcome of the regression showed more significance in terms of variables. All three banks showed that liquidity risk is unaffected by the investments to assets ratio. A dummy variable was also included to capture the impact of the financial crisis on liquidity risk. Both BOV's and HSBC's liquidity risk was to some extent affected by the credit crunch, while Lombard's risk management was suitable enough to avoid the undesirable consequences of the crisis.
Description: B.COM.(HONS)BANK.&FIN.
URI: https://www.um.edu.mt/library/oar//handle/123456789/10171
Appears in Collections:Dissertations - FacEma - 2013
Dissertations - FacEMABF - 2014

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