Work detail

Liquidity risk under Basel III in the EU

Author: Mgr. Alžběta Mošnová
Year: 2014 - winter
Leaders: doc. PhDr. Petr Teplý Ph.D.
Consultants:
Work type: Economic Theory
Masters
Language: English
Pages: 84
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance.
Link: https://is.cuni.cz/webapps/zzp/detail/133653/
Abstract: In
order to address
the deficiencies in the banking regulation revealed by the recent financial
crisis
the
Basel III
introduces two minimum st
andards
for funding liquidity,
Liquidity
Coverage Ratio (
LCR
)
and
Net Stable Funding Ratio (
NSFR
)
.
The goal of this thesis is to
analyze whether the NSFR
is
defined
optimally
or whether the
Basel Committee on Banking
Supervision (
BCBS
)
will be forced to relax NSF
R conditions similarly as
happened
by
the
LCR.
Based on the approximation of the NS
FR
between 2007 and 2012 for a
sample of 3 128
European banks
we test the ab
ility of banks to satisfy the NSFR
.
Our results suggest that the
European
banks have not started
to converge to the NSFR yet
. D
espite this fact
they
should
not have problems with meeting
this requirement
as
40.3% of banks in our sample would
have
already
satisfied
the
NSFR
in 2011
.
A
Probit model analysis sugges
ts that the NSFR
requirement
will decrea
se
the probability of bank defaults and
therefore
increase the stability
of the banking sector
in the future
which proves that the NSFR is correctly specified
.
Moreover, a
simple stress testing shows that
the stability of the system would not be improved
a
nymore
if the NSFR
was
define
d
more strictly
. The current version of
the
NSFR therefore
seems to be optimal
and in our opinion
sho
uld be implemented earlier than in 201

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