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How liquid are banks: Some evidence from the United Kingdom

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journal contribution
posted on 24.04.2020, 12:28 by Meilan Yan, Dalu Zhang, Maximilian J. B. Hall, Paul Turner
This article uses quantitative balance sheet liquidity analysis, based upon modified versions of the BCBS and Moody’s models, to provide indicators which would alarm the UK banks’ short- and long-term liquidity positions, respectively. These information will also underpin other research related liquidity risk to banks’ lending and performance. Our framework accurately reflect UK banks’ liquidity positions under both normal and stress scenarios based on the consistent accounting information under International Financial Reporting Standards. It has significant contribution on Basel III liquidity ratios calculation. The study also presents fundamental financial information to facilitate analysis of banks’ business models and funding strategies. Using data for the period 2005–2010, we provide evidence that there have been variable liquidity strains across the UK banks in our sample. The estimated results show that Barclays Bank was the only bank to maintain a healthy short-term liquidity position throughout the sample period; while HSBC remained liquid in the short term, in both normal and stress conditions, except in 2008 and 2010. RBS, meanwhile, maintained healthy long-term liquidity positions from 2008 after receiving government injections of capital. And Santander UK was also able to post healthy long-term liquidity positions, except in 2009. However, the other four banks, the Bank of Scotland, Lloyds TSB, NatWest and Standard Chartered, proved illiquid, on both a short-term and long-term basis, throughout the 6-year period, with NatWest being by far the worst performer.

History

Citation

Journal of Banking Regulation, 2017, 18 (2), pp. 163-179

Author affiliation

School of Business

Version

AM (Accepted Manuscript)

Published in

Journal of Banking Regulation

Volume

18

Pagination

163-179

Publisher

Palgrave Macmillan

issn

1745-6452

eissn

1750-2071

Copyright date

2017

Available date

03/05/2017

Publisher version

https://link.springer.com/article/10.1057/jbr.2016.3

Language

en

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