IDEAS home Printed from https://ideas.repec.org/a/mup/actaun/actaun_2014062020427.html
   My bibliography  Save this article

Liquidity Risk Sensitivity of Czech Commercial Banks

Author

Listed:
  • Pavla Vodová

    (Department of Finance, School of Business Administration in Karviná, Silesian University in Opava, Univerzitní nám. 1934/3, 733 40 Karviná, Czech Republic)

Abstract

The recent financial crisis has shown that a liquidity risk plays an important role in the current developed financial system. One of the efficient tools of liquidity risk management is stress testing which can show banks their potential vulnerability to liquidity shocks. The aim of this paper is therefore to measure the liquidity risk sensitivity of Czech commercial banks and to find out the most severe scenario and the most vulnerable bank. Our sample included significant part of the Czech banking sector; we used unconsolidated balance sheet data over the period from 2000 to 2011 which were obtained from annual reports of Czech banks. We have evaluated liquidity risk of each bank in the sample via six different liquidity ratios. Then we stressed these baseline values in three stress scenarios: run on a bank (simulated by a 20% withdrawal of deposits), confidence crisis on the interbank market (simulated by a withdrawal of 20% of interbank deposits) and use of committed loans by counterparties (simulated by a 5% increase of loans provided to nonbank clients). We measured the impact of all scenarios by relative change of liquidity ratios. The impact of modelled liquidity shocks differs among scenarios. The most serious liquidity problems would be caused by the first scenario - run on a bank. The negative influence of third scenario (use of committed loans) is less severe. The confidence crisis on the interbank market would not affect bank liquidity at all. The results also show that the severity of the impact of all scenarios worsens in periods of financial distress. We have also found that large and medium sized banks are most vulnerable to liquidity shocks, mainly to massive deposit withdrawals.

Suggested Citation

  • Pavla Vodová, 2014. "Liquidity Risk Sensitivity of Czech Commercial Banks," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 62(2), pages 427-436.
    • Handle: RePEc:mup:actaun:actaun_2014062020427
    DOI: 10.11118/actaun201462020427
    as

    Download full text from publisher

    File URL: http://acta.mendelu.cz/doi/10.11118/actaun201462020427.html
    Download Restriction: free of charge
    File URL: http://acta.mendelu.cz/doi/10.11118/actaun201462020427.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.11118/actaun201462020427?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael Boss & Gerhard Fenz & Gerald Krenn & Johannes Pann & Claus Puhr & Thomas Scheiber & Stefan W. Schmitz & Martin Schneider & Eva Ubl, 2008. "Stress Tests for the Austrian FSAP Update 2007: Methodology, Scenarios and Results," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 15, pages 68-92.
    2. Arion NEGRILÄ‚, 2010. "The Role of Stress-test Scenarios in Risk Management Activities and in the Avoidance of a New Crisis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 2(2(543)), pages 5-24, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pavla Klepková Vodová, 2015. "Banks Belonging to the Erste Group and their Sensitivity to the Confidence Crisis on the Interbank Market," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 1953-1960.
    2. Pavla Klepkova Vodova, 2015. "Sensitivity of Czech Commercial Banks to Run on Banks," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 91-107, June.
    3. Pavla Klepková Vodová & Daniel Stavárek, 2015. "Factors Affecting Sensitivity of Czech and Slovak Commercial Banks to Bank Run," Working Papers 0020, Silesian University, School of Business Administration.
    4. Borio, Claudio & Drehmann, Mathias & Tsatsaronis, Kostas, 2014. "Stress-testing macro stress testing: Does it live up to expectations?," Journal of Financial Stability, Elsevier, vol. 12(C), pages 3-15.
    5. Waelchli Boris, 2016. "A proximity based macro stress testing framework," Dependence Modeling, De Gruyter, vol. 4(1), pages 1-26, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mup:actaun:actaun_2014062020427. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ivo Andrle (email available below). General contact details of provider: https://mendelu.cz/en/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.