A Study on the Measurement of Short-term Stability of Individual Banks——Based on the Indicators of Modified Liquidity Gap Rate

Abstract

Abstract:

Liquidity gap is one of core indicators to measure liquidity risk of the bank as well as its short-term stability. Traditionally, the calculation of liquidity gap does not take account of the outstanding assets liquidated and outstanding liabilities withdrawn in advance. This paper introduces the model of credit default swaps to calculate the raised liquidity sources increased by credit assets traded ahead of time. At the same time, it pays attention to simulating the expanded liquidity gap led by outstanding deposits withdrawn through three stress testing, trying to build the indicator of "the modified liquidity gap ratio" to measure the bank's stability in short term. Moreover, this paper proposes an idea to rank the liquidity level based on the modified rate of bank liquidity gap, trying to classify stability into three grades, including EXCELENT, GOOD and POOR, which could provide a support of quantifying liquidity risk management and short-term stability for the banks and market supervisors. Therefore, this paper makes an empirical analysis of 10 major listed banks based on the panel data from 2004 to 2012. The results are as follows: compared to the large state-owned commercial banks, joint-stock commercial bank do a better performance in short-term stability; the rise of long-term deposits proportion can improve mobility while liquidity gap ratio is positively correlated; high proportion of long-term loans will increase the liquidity gap with a negative correlation; however, the relationship between the bank's return on assets (ROA), as well as net interest margin deposits, loans and the growth rate of GDP and short-term stability is not significant.

Key words: bank short-term stability, the modified liquidity gap ratio, the credit trading, rank of stability, scenario simulation

Gu Xiaoan, Zhu Shulong. A Study on the Measurement of Short-term Stability of Individual Banks——Based on the Indicators of Modified Liquidity Gap Rate[J]. , 2016, 28(2): 35-48,73.

References

[1] Hyman P. Minsky. The Financial Instability Hypothesis: Capitalist Processes and the Behaviour of the Economy,Financial Crises: Theory, History and Policy[M]. Cambridge: Cambridge University Press, 1982
[2] Diamond D. W., Dybvig P. H. Bank Runs, Deposit Insurance and Liquidity[J]. The Journal of Political Economy, 1983,91(3):401-419
[3] 高国华,潘英丽.基于动态相关性的我国银行系统性风险度量研究[J]. 管理评论, 2013,25(1):9-15
[4] Fisher I. The Debt-deflation Theory of Great Depressions[J]. Econometric: Journal of the Econometric Society, 1933,1(4):337-357
[5] Friedman M. The Quantity Theory of Money: A Restatement[J]. University of Chicogo, 1956,4(2):281-308
[6] Laeven L., Levine R. Bank Governance, Regulation and Risk Taking[J]. Journal of Financial Economics, 2009,93(2):259-275
[7] Martinez-Miera D., Repullo R. Does Competition Reduce the Risk of Bank Failure?[J]. Review of Financial Studies, 2010,23(10):3638-3664
[8] Malherbe F. Self-Fulfilling Liquidity Dry-Ups[J]. The Journal of Finance, 2014,69(2):947-970
[9] Calmès C., Théoret R. The Impact of Off-balance-sheet Activities on Banks Returns: An Application of the ARCH-M to Canadian Data[J]. Journal of Banking & Finance, 2010,34(7):1719-1728
[10] Uhde A., Michalak T. C. Securitization and Systematic Risk in European Banking: Empirical Evidence[J]. Journal of Banking & Finance, 2010,34(12):3061-3077
[11] Allen F., Gale D. Competition and Financial Stability[J]. Journal of Money, Credit and Banking, 2004,36(3):453-480
[12] Hellmann T. F., Murdock K. C., Stiglitz J. E. Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?[J]. American Economic Review, 2000,90(1):147-165
[13] Nicoló G. D., Bartholomew P., Zaman J., et al. Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk[J]. Financial Markets, Institutions & Instruments, 2004,13(4):173-217
[14] Acharya V. V., Mora N. A Crisis of Banks as Liquidity Providers[J]. The Journal of Finance, 2015,70(1):1-43
[15] Carlstrom C. T., Samolyk K. A. Loan Sales as a Response to Market-based Capital Constraints[J]. Journal of Banking & Finance, 1995,19(3):627-646
[16] Duffie D. Innovations in Credit Risk Transfer: Implications for Financial Stability[J]. SSRN Electronic Journal, 2008,68(3):1-18
[17] Nijskens R., Wagner W. Credit Risk Transfer Activities and Systemic Risk: How Banks Became Less Risky Individually But Posed Greater Risks to the Financial System at the Same Time[J]. Journal of Banking & Finance, 2011,35(6):1391-1398
[18] Gande A., Saunders A. Are Banks Still Special When There Is a Secondary Market for Loans?[J]. The Journal of Finance, 2012,67(5):1649-1684
[19] Imbierowicz B., Rauch C. The Relationship between Liquidity Risk and Credit Risk in Banks[J]. Journal of Banking & Finance, 2014,40(1):242-256
[20] Parlour C. A., Winton A. Laying off Credit Risk: Loan Sales Versus Credit Default Swaps[J]. Journal of Financial Economics, 2013,107(1):25-45
[21] 孙安琴.信用风险转移与银行体系稳定性研究[J]. 金融研究, 2011,(11):102-111
[22] 庄毓敏,孙安琴,毕毅.信用风险转移创新与银行(体系)的稳定性-基于美国银行数据的实证研究[J]. 金融研究,2012,(6):83-94
[23] 张金清,张健,吴有红.中长期贷款占比对我国商业银行稳定的影响: 理论分析与实证检验[J]. 金融研究, 2011,(9):78-92
[24] 顾晓安,张涛.利率市场化进程中商业银行财务稳定性研究[J]. 南方金融, 2013,(10):20-25
[25] Fahlenbrach R., Prilmeier R., Stulz R. M. This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance During the Recent Financial Crisis[J]. The Journal of Finance, 2012,67(6):2139-2185
[26] Gary B. Gorton. Misunderstanding Financial Crises: Why We Don't See Them Coming[M]. Oxford: Oxford University Press, 2012
[27] Lando D. Credit Risk Modeling: Theory and Application[M]. Princeton: Princeton University Press, 2009