Research Questions

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Research Questions
Introductory Information
The financial system’s role in society is to efficiently allocation credit (Hartlage, 2012). However, the nature of banking is to receive short-term maturity deposits, but lend long-term (Hartlage, 2012). Consequently, this process of transforming maturities exposes banks to liquidity risks (Hartlage, 2012).
The global financial crises (GFC) of 2008 initiated as a credit crisis, which turned into a liquidity crisis as banks, were afraid to lend to other banks because they did not know who was holding illiquid assets ( Imbierowicz & Rauch , 2014). Liquidity and credit risks play a central role in bank stability, failing to account for their joint occurrence in their risk management systems was a major cause of bank failure during the GFC (Imbierowicz & Rauch, 2014). After the GFC, the Basel Committee on Banking Supervision (BCBS) reached the Basel III accord, a measure designed to strengthen the liquidity positions of financial institutions, so that they could sustain financial and economic shocks (Ramona, 2013).
Part of the Basel III liquidity recommendations is the Liquidity Coverage Ratio (LCR), whose implementation will be a challenging task for any bank (Ramona, 2013). Banks will also need to streamline their systems, and processes to operate effectively, and reduce capital requirements (Ramona, 2013). According Hartlage (2012), LCR’s objective is to require banks to have sufficient liquidity to survive 30 days under severe financial hardship.
There are key implications for future work seeking to understand the impact of Basel III LCR requirements (Balasubramanyan and VanHoose, 2013). First, the dynamic behavior of cash flows used to compute the LCR’s denominator (Balasubra...

... middle of paper ...

... The relationship between liquidity risk and credit risk in banks. Journal of Banking & Finance, 40242-256. doi:10.1016/j.jbankfin.2013.11.030

Jasienėl, M., Martinavičius, J., Jasevičienė, F., & Krivkienė, G. (2012). Bank liquidity risk: analysis and estimates. Business, Management & Education / Verslas, Vadyba Ir Studijos, 10(2), 186-204. doi:10.3846/bme.2012.14

Kern, R. (2012).The research questions handout. Nova Southeastern University. Retrieved from http://apps.fischlerschool.nova.edu/toolbox/Dissertation/Handouts/

Laerd Dissertation (2012). In Dissertations & Theses an online textbook. Retrieved from http://dissertation.laerd.com/

Ramona, T. (2013).BASEL I, II, III: Challenges to the bank’s capital adequacy. Annals of the University of Oradea, Economic Science Series, 22(2), 463-471. Retrieved from http://steconomice.uoradea.ro/anale/en_index.html

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