Methods of control bank liquidity

Maintaining liquidity is a serious and complex issue. In world practice, methods were developed (the theory), liquidity management, which are part of bank management. The composition of such methods include: asset management, liability management, sustainable management of liquidity (assets and liabilities). Characterization techniques for liquidity management, the advantages and disadvantages are summarized. The oldest way to ensure the needs of the bank for liquidity is the liquidity management through asset. In the most general form of liquidity management through asset accumulation requires high quality liquid assets that are fully address the needs of the bank's liquidity. In the event of a demand for liquidity assets are sold, not yet meet the needs of money. Consequently, there is a conversion (transformation) of assets in cash. With this approach, characterized as liquidity reserve. The assets must have the following properties: to have its own market, have sufficiently stable prices, that is, the market should have the ability to make all of the assets being sold without a significant reduction in their prices, the seller's assets should be able to recover the initial investment with minimum risk. If you are using a strategy of transformation of the assets necessary to: determine the optimal ratio for the bank's highly liquid and total assets, taking into account the stability of the resource base, to carry out a comparative analysis of price movements in markets that are suitable for the disposal of assets (if such a choice exists). Liquidity management in asset management is the traditional and the simplest approach. Basically, this strategy is used by small banks, which have no opportunities of borrowing and access to money markets. Category: Management Operations Commercial Bank | Tags: banking system liquidity