Liquidity of a commercial bank is the ability to timely and without loss fulfill their obligations to clients (depositors, creditors, investors).
Bank obligations can be real and conditional.
Real obligations are reflected in the bank's balance sheet in the form of demand deposits, time deposits, attracted interbank resources, creditors' funds. Potential or off-balance sheet liabilities expressed in guarantees issued by the bank, open credit lines to customers, etc.
Real obligations - these are the liabilities that are reflected in the respective balance accounts in the form of deposits, attracted interbank loans, issued securities (bills, deposit and savings certificates).
Contingent Liabilities - These are liabilities of the bank reflected in off-balance sheet accounts. These are obligations that may arise under certain circumstances, such as guarantees, guarantees issued by a bank.
According to the terminology established by IFRS, real and contingent liabilities are monetary and other liabilities arising from transactions using financial instruments, i.e. any contract that gives rise to a monetary asset of one enterprise and a monetary liability or capital instrument of another enterprise.
Factors that determine the liquidity of a commercial bank can be internal and external.
Internal factors include:
Strong capital base means the presence of a significant absolute value of equity capital. The basis of equity capital is the statutory fund and other funds of the bank intended for various purposes, including to ensure financial stability jar. The larger the bank's equity capital, the higher its liquidity.
Another factor affecting the bank's liquidity is the quality of its assets. When calculating the ratios, the assets of a commercial bank are divided into five risk groups, taking into account the degree of risk of investing funds and, accordingly, the possible loss of part of the value of these funds in an unfavorable situation. Simultaneously certain categories Assets included in each of the five groups are assigned an appropriate risk adjustment factor (from 0 to 100%), which shows how much of the value of this category of assets can be lost, or otherwise, to what extent it is safe to invest in GU or another category of assets jar.
External factors include:
The general political and economic situation in the country creates prerequisites for development banking operations and the success of the banking system, ensures the stability economic basis activities of banks, strengthens the confidence of domestic and foreign investors in banks. Without these conditions, banks are not able to create a stable deposit base, achieve profitability of operations, improve the management system, and improve the quality of assets.
The development of the securities market makes it possible to provide an optimal system of liquid funds without loss of profitability, since the fastest way to convert bank assets into cash in most foreign countries associated with the functioning of the stock market.
The development of the interbank market contributes to the redistribution between banks of temporarily free cash resources, maintaining the liquidity of commercial banks. The system of refinancing of commercial banks by the Bank of Russia is also connected with this factor. In this case, the Bank of Russia becomes the source of replenishment of resources, with the help of which the liquidity of a commercial bank is maintained.
The effectiveness of the supervisory functions of the Bank of Russia determines the degree of interaction between the state supervisory authority and commercial banks in terms of liquidity management.
The liquidity of the bank is closely related to the liquidity of the balance sheet. In order to maintain the liquidity of the balance sheet, the bank is obliged to constantly maintain the necessary and sufficient level of funds on correspondent accounts, cash on hand, marketable assets, i.e. manage liquidity.
The main elements of liquidity management are:
Assessing the bank's liquidity is one of the most difficult tasks, allowing you to get an answer to the most important question: is the bank able to meet its obligations. The bank's ability to meet its obligations is affected by the characteristics of the state and changes in the resource base, the recovery of assets, financial results activities, the amount of own funds (capital) of the bank, as well as the quality of bank management, management, which at certain moments can play and play a decisive role.
To control the state of the bank's liquidity, three liquidity ratios (instant, current and long-term) have been established. They are defined as the ratio between assets and liabilities, taking into account the terms, amounts and types of assets, as well as other factors.
Instant liquidity ratio (N2) regulates (limits) the risk of loss of liquidity by the bank within one business day and determines the minimum ratio of the amount of the bank's highly liquid assets to the amount of the bank's liabilities on demand accounts.
The standard is calculated by the formula
Bank's current liquidity ratio (NZ) limits the risk of liquidity loss by the bank within 30 calendar days closest to the date of calculation of the standard and determines the minimum ratio of the amount of the bank's liquid assets to the amount of the bank's liabilities on demand accounts and for a period of up to 30 calendar days.
The current liquidity ratio (N3) is calculated by the formula
Calculations of L a.t and O v.t are made in accordance with the instructions of the Bank of Russia. The minimum allowable value of the H3 standard is set at 50%.
Highly liquid and liquid assets include only those financial assets of the bank that, in accordance with the regulatory documents of the Bank of Russia, belong to the first category of quality (1st risk group) and the second category of quality (2nd risk group). In addition to the above assets, the calculation of indicators L a.m and L a.t includes balances on balance accounts for which there are no requirements for the formation of reserves, if the assets on the corresponding balance accounts are planned by the bank to be received within 30 next calendar days. days in a form that allows them to be classified as highly liquid and liquid assets.
Long-term liquidity ratio(N4) regulates (limits) the risk of loss of liquidity by the bank as a result of placing funds in long-term assets and determines the maximum allowable ratio of the bank's credit claims with the remaining maturity to the maturity date of more than 365 or 366 calendar days, to the bank's own funds (capital) and liabilities ( liabilities) with the remaining term to the maturity date exceeding 365 or 366 calendar days. The bank's long-term liquidity ratio (N4) is calculated using the formula
The maximum allowable value of the H4 standard is set at 120%.
To assess the liquidity of a bank, in addition to liquidity standards, you can also use a system of indicators that, in combination, allow you to assess the state of the bank's liquidity both at a given point in time and in the medium term.
1. Settlement documents not paid on time due to lack of funds on correspondent accounts of the bank.
Balances of off-balance accounts 90903, 90904.
The presence of non-payments reflected in these accounts means that the bank has problems with making payments and there are delays in customer payments. If the balances on these accounts tend to grow for a long time, then the bank is insolvent and illiquid.
2. The indicator reflects the level of business activity of the bank. It represents the ratio of turnover on correspondent accounts and the bank's cash desk to the net balance asset:
K2\u003d Turnover on the loan of correspondent accounts and cash desks / Net balance asset
This indicator allows assessing the overall level of the bank's business activity and the impact of the risks taken by the bank on its sustainable functioning. If the indicator has a pronounced downward trend, this may indicate a reduction in bank operations and even curtailment of its activities.
The reasons for this state may be the low quality of part of the assets (primarily the loan portfolio), the bank's problems with making customer payments. Actively operating banks have a business activity index above 1.0.
3. The ratio of the net and liquid position of the bank allows you to assess the extent to which the bank attracts loans in the interbank market to cover the liquidity deficit:
K3= Funds on correspondent nostro accounts and on hand / Short-term interbank loans and credits of the Central Bank of the Russian Federation
If , this indicates that the bank covers the liquidity deficit through loans in the interbank market. The systematic use of these short term resources to cover a long, long-term gap speaks of liquidity problems. In addition, banks analyze counterparties, and access to the interbank market may be terminated for such a bank, then the potential risk of loss of liquidity is transformed into a very real insolvency.
4. The coefficient of the current balance of assets and liabilities of the bank:
K4= Claims (assets) for up to 30 days / Liabilities (liabilities) for up to 30 days
Using the current balance ratio, you can assess the possibility of problems with making payments. If the indicator consistently exceeds 1.0, the probability of a liquidity shortage is practically minimal. If the value of the indicator is consistently below 0.6-0.7 and tends to decrease, then this is a sign of a possible liquidity shortage.
The medium-term balance ratio, which is similar in meaning, allows us to assess the possibility of liquidity problems in the future:
K5= Claims (assets) for up to 180 days / Liabilities (liabilities) for up to 180 days
The considered liquidity ratios allow you to manage liquidity credit institution both for a specific date and for the future. In addition to the coefficient method for measuring liquidity, Russian practice uses a cash flow management mechanism that reflects the movement of not only assets and liabilities, but also off-balance sheet operations of a credit institution.
Liquidity management of a commercial bank is an important area of banking financial management because it provides high level stability, stability and reliability of activity.
There are the following concepts of liquidity:
The tasks of liquidity management are to ensure a balance in the balance between the amount and term of the release of funds on the asset and the amount and term of the upcoming payment on the bank's obligations, as well as maintaining the optimal ratio between the liquidity of the balance sheet and the profitability of activities.
Bank liquidity is affected by two groups of factors:
1) external:
2) internal:
According to the level of liquidity, bank assets are usually divided into three groups:
Bank liquidity management is carried out both at the state level and at the level of a commercial bank.
The Central Bank of the Russian Federation in order to manage banking liquidity, based on its powers in the field of state monetary policy, the implementation of the functions of banking regulation and supervision of the activities of credit institutions, in accordance with Instruction No. 110-I "On the mandatory ratios of banks" dated 16.01.2004 . established from April 1, 2004 mandatory economic standards for commercial banks, presented in table 3.
The following designations are used in the table:
LAm - highly liquid assets;
OBm - demand liabilities;
lat - liquid assets of the bank;
OBT − liabilities on demand and for up to 30 days;
Krd - loans issued by the bank in rubles and foreign currency with a maturity of more than a year, as well as 50% of guarantees and guarantees issued by the bank with a validity of more than a year;
K - the bank's own capital, determined in accordance with the Regulation of the Central Bank No. 215-P;
ML - debt obligations in rubles and foreign currency circulating on the market with a maturity of more than a year;
RC* m - the value of the minimum total balance of funds on the accounts of individuals and legal entities(except for credit organizations) on demand;
OV* t - the value of the minimum aggregate balance of funds on accounts of individuals and legal entities (except for credit institutions) on demand and with a maturity date of obligations in the next 30 calendar days;
M* - the value of the minimum total balance of funds on accounts with a maturity of up to 365 calendar days and on demand accounts of individuals and legal entities (except for credit institutions) that are not included in the calculation of the ML indicator;
Аi − i-th asset of the bank;
Крi is the risk coefficient of the i-th asset, determined according to the table in Appendix B;
Ркi - the amount of the reserve for possible losses or the reserve for possible losses on loans, on loan and equivalent debt of the i-th asset;
KRV - value credit risk on contingent liabilities of a credit nature;
KRS - the amount of credit risk on futures transactions;
РР is the amount of market risk;
Krz is the total amount of the bank's claims against the borrower (a group of related borrowers) on loans, discounted promissory notes, on deposits in precious metals and amounts not collected on bank guarantees, as well as off-balance sheet claims (guarantees, guarantees) of the bank in respect of this borrower(borrowers), providing for execution in cash. The total amount of the bank's claims against the borrower includes overdue loans, overdue indebtedness on operations with precious metals, as well as acquired debentures borrower (excluding interest on promissory notes);
Σ Kcr is the total value of large loans. A large loan is an amount issued to one borrower (a group of related borrowers) and exceeding 5% of the creditor bank's capital;
Σ Kra - the total amount of all claims of the bank (including off-balance sheet claims), taking into account the risk and claims of the bank in rubles, foreign currency and precious metals in relation to its shareholders (participants);
Σ Kin - own funds of credit institutions used to acquire stakes (shares) in other legal entities.
Compliance with these standards by commercial banks is controlled by the Central Bank departments at the location of these banks. The basis of their calculation are the balance sheets of banks and the actual values of the established standards. If the liquidity level of the balance sheet is violated, commercial banks are ordered to take measures to improve their financial situation within a month.
In relation to banks that systematically violate the standards, economic sanctions can be applied: an increase in the standard for depositing funds (but not more than the maximum established), limiting the amount of refinancing, etc.
Liquidity management at the level of a commercial bank is based on the following theories.
The theory of commercial loans has its origins in classical English banking practice of the 19th century; it is characteristic of the initial, low level of development of banking, when, in order to maintain the liquidity of their institution, bankers were forced to hold funds only in short-term loans, secured by goods in the process of production or goods in transit to the place of sale.
An essential condition for the practical application of this theory is the timely repayment of loans in the normal state of business activity, as well as the role of the Central Bank as a lender of last resort.
With an economic downturn, a financial crisis, the weakening of some and the bankruptcy of other potential borrowers, defaults and high systemic risk in banking, the return of even short-term loans becomes problematic, which makes it difficult to use the theory of commercial loans.
In addition, this theory limits the participation of banks in investment projects on the expansion and technical re-equipment of enterprises, mortgage programs, etc.
The theory of displacement, or transferability, was first published in 1918 by the American scientist H.J. Moulton. It states that liquidity can be provided if a certain proportion of deposits is directed to the acquisition of such assets for which there is a secondary market. That is, in order to meet the requirements of depositors who want to withdraw their money, and the increased demand for a loan, the bank sells highly liquid assets.
Therefore, the theory of movement assumes the presence of a number of types of investments that the bank, if necessary, can realize quickly enough and without loss. This theory has certain disadvantages:
- the sale of many types of assets is associated with the payment of commissions to intermediaries;
– in case of urgent sale, a forced sale of assets below the actual value is possible.
Thus, the use of the transfer theory in the practice of bank liquidity management is effective if there are sufficiently stable markets that meet the following requirements:
- the turnover and frequency of transactions in the market must be such as to definitely confirm the existence of the market itself;
- there is a price dynamics for liquid assets, market patterns of the relationship between supply and demand are observed;
- the risk of non-return of the initial investment is minimal.
In world practice, the main financial instruments acting as secondary reserves are investments in government securities.
In addition, interbank loans for short term, REPO transactions, bank acceptances, commercial paper, loans in Eurocurrency and Eurodollars, etc.
The presence of a secondary securities market and, in particular, the work of the Central Bank of the Russian Federation with the securities of various issuers expand the range of opportunities for banks to manage liquidity.
For example, in the event of a default on a loan secured by securities, the bank should be able to either sell the pledged securities or obtain a loan from the Central Bank of the Russian Federation against the security of these securities. In our country, at present, the list of securities that the Central Bank of the Russian Federation accepts as collateral for lombard loans includes only government securities (including bonds of the Bank of Russia, federal subjects), bonds of mortgage agencies, corporate bonds of reliable issuers, bonds with mortgage coated, bonds of international financial organizations.
Single reserve fund (“common pool”) was formulated by US bankers during the Great Depression and considers all bank funds raised as single fund. Funds from this fund are distributed as follows: first, primary reserves are replenished (cash and a correspondent account with the Central Bank). Then secondary reserves are formed from among short-term highly liquid securities (with this approach, secondary reserves are the main means of providing liquidity for the bank). Further, the funds of the fund go to finance all eligible loan applications, and the loan portfolio is not considered a means of providing liquidity. After that, the remaining funds are directed to the purchase of long-term securities, which, on the one hand, are a source of income, and on the other hand, replenish secondary reserves as their maturity approaches.
Using the Single Reserve Fund Approach in the Long Term for Stabilization economic situation The country has a number of shortcomings:
- focuses on maximizing highly liquid funds that do not provide a sufficient level of profitability, which in the long term adversely affects the financial stability of the bank;
– does not take into account the urgency of various types of deposits: demand deposits are intended for settlements, while savings and time deposits are placed to generate income and have significant retention periods;
– does not take into account the liquidity of the portfolio of loans issued.
The theory of expected income was developed by G. Proshnov in the 1950s. and implies that mortgage loans and long-term coupon-yielding securities provide a constant inflow of income, thereby increasing the bank's liquidity.
The essential point of this theory is the presence in the economy of a wide range of active operations for banks in a stable or at least predictable state of the economy.
The application of the theory of expected income is associated with the difficulties of forecasting the future receipt of funds in conditions of high inflation and massive non-payments.
The theory of liability management implies the possibility of attracting additional resources from the money market to maintain the liquidity of the bank. According to this theory, most of the resources should be placed on more long terms than they were attracted, ensuring the repayment of loans by taking into account collateral, and covering the need for funds for repayment of unexpected obligations from such sources as interbank loans, etc. The main advantage of this theory is that, at first glance, without increasing the bank's liquidity risk, it allows optimizing its costs for ongoing operations.
Currently, in order to quickly raise funds Russian banks The money market has the following options:
– interbank loans;
– term deposits and certificates of deposit. The widespread use of this source in our country is impossible due to the limited funds of most domestic enterprises and organizations;
– REPO operations;
- loans from the Central Bank.
The application of the theory of liability management is associated with a certain risk associated with the inability to find resources at a low price and the need to make up for the lack of funds by raising attraction rates.
Convertibility approach bank funds is based on a variety of sources of raising free cash. Each source has its own volatility, cost, and certain requirements are imposed on it, therefore it is advisable to consider each source of funds separately and correlate it with assets with similar maturities. For example, most of the demand deposits should be used to replenish primary and secondary reserves, and the proceeds from the placement of bonds should be used to finance long-term loans.
The main advantage of this approach is the emphasis on the need to achieve bank profitability. In theory, maintaining a match between active and passive operations would provide one hundred percent liquidity for the bank. However, in practice, factors whose dynamics are difficult to predict have a great influence. For example, the timely repayment of a loan by a client depends not only on the desire of the bank to return the funds, and even not only on the good faith of the client, but also on a number of risks related both directly to the borrower and his counterparties, as well as country, political risks.
Over the past decade in practical activities Russian banks used all theories in one way or another when managing liquidity. The choice of one or another theory is determined by the size of the bank, the volume of active and passive operations, the characteristics of the clientele, the development of the money market in the region, and many other factors.
Bank liquidity- its ability to fulfill its obligations to depositors, creditors and other clients in a timely manner and without loss.
The bank's liabilities are made up of real and conditional.
Real obligations are reflected in the bank's balance sheet in the form of demand deposits, time deposits, attracted interbank resources, creditors' funds.
Contingent liabilities first of all, they are expressed by off-balance sheet liabilities of banks' operations, as well as active off-balance sheet operations.
To fulfill its obligations, the bank uses the following liquid assets:
Cash, expressed in cash balances on hand and on correspondent accounts;
Assets that can be quickly turned into cash;
Interbank loans, which, if necessary, can be obtained from the interbank market or from the Bank of Russia;
Other funds raised, such as the issuance of certificates of deposit and bank notes.
Liquidity of assets- the ability of assets to be transformed into cash without loss through their sale or repayment of obligations by the debtor, while the degree of possible losses is determined by the riskiness of assets.
First group constitutes prime liquid assets, which include:
Directly the bank's funds located in its cash desk or on correspondent accounts;
Government securities held in the bank's portfolio, which it may resort to selling in the event of insufficient cash to pay off obligations to creditors.
second group assets in terms of liquidity are:
Short-term loans of legal and individuals;
Interbank loans, factoring operations;
Corporate securities held for sale.
They have a longer period of conversion into cash.
Third group assets covers long-term investments and bank investments, including long-term loans, leasing operations, investment securities.
To fourth group assets include illiquid assets in the form of overdue loans, certain types of securities, buildings and structures.
Each of these groups is characterized by a certain degree of risk. The less liquid the assets, the higher their riskiness.
The liquidity of the bank, as well as its activities in general, is affected by a huge number of factors of multidirectional action. These factors are divided into external and internal that operate at the level of the bank itself and are related to its policy. The first - the bank can only take into account in its activities, and the last - the bank can not only take into account, but also influence them, reducing the negative consequences of their impact. External factors are of an objective nature, the bank should adapt its credit policy to them as much as possible.
To external factors include:
1. Economic and political situation in the country. The instability of the general political and economic situation in the country has a direct impact on the instability of the banking system as a whole and the commercial bank as its constituent link.
2. Efficiency state regulation and control. Commercial banks are experiencing the full range of impact of government measures of monetary regulation. The following points have a direct impact on liquidity and solvency:
3. The state of the money market and the securities market. This factor shows the nature of the redistribution of temporarily free funds between participants financial market and in particular between banks. Thus, the high level of market development enables banks to quickly raise funds in order to maintain liquidity, and the stable state of the securities market provides the ability to quickly sell securities if necessary.
4. Possibility of state support. This factor manifests itself through the monetary policy government and the central bank, for example, the possibility of obtaining government loans from the resources of the central bank.
5. Perfection of legislation (if there is an indication in the law that each commercial Bank must have cash central bank, this will provide at least minimal liquidity).
6. Reliability of clients and partners of the bank. On the one hand, a decrease in demand accounts in favor of urgent ones leads to an increase in liquidity, since the bank has greater confidence that there will be no payments on obligations within a certain period of time. On the other hand, the reliability of partner banks leads to the fact that they can help with funds at any time by providing an interbank loan.
Internal factors are directly related to its activities, therefore, by changing the internal or external policy of the bank, it is possible to limit the impact of factors that cause negative fluctuations in liquidity. Thus, the creation of branches, decentralization of powers and goals (instruments of the internal policy of the bank) leads to an increase in liquidity and, accordingly, the solvency of the bank, since each branch has its own funds, is engaged in certain operations, which can serve as an additional source of funds for the head bank. At the same time, specialization and diversity banking services(as elements of foreign policy) increases liquidity.
To internal factors include:
1. The quality of bank management. The professionalism and skill level of managers and employees of the bank has an impact on the state of liquidity of a commercial bank. This factor is a key factor in ensuring the bank's liquidity.
2. Adequacy of the bank's own capital. A significant amount of the bank's capital base has a positive effect on the level of its liquidity, since equity capital acts as a shock absorber in the event of unforeseen circumstances that will lead to a withdrawal of funds and, as a result, cause a liquidity or solvency crisis.
3. Quality and sustainability of the bank's resource base.
4. The degree of dependence on external sources of borrowing. The stronger this dependence is expressed in a bank, the more serious the problems can be in the event of even a temporary insolvency.
5. Balance of assets and liabilities in terms of amounts and terms. The more short-term assets, the higher liquidity and vice versa.
6. The degree of risk of individual active operations. Means the probability of losses in the sale of assets or the risk of non-return of invested funds.
The riskiness of assets depends on internal and external factors, such as:
The higher the risk of active operations of the bank, the greater the likelihood of losses during the transformation of assets into cash, and this will negatively affect its liquidity.
7. Profitability of bank assets. The greater the share of working assets in the bank's balance sheet and the higher their efficiency, profitability, the more stable the financial condition of the bank.
8. Structure and diversification of assets. In the process of liquidity management, special attention should be paid to the structure of assets. For implementation settlement and cash services customers, the return of funds on demand, the bank needs to have a certain stock of highly liquid assets.
Diversification of assets, i.e. placing them in different directions, has a positive effect on the level of liquidity, since the total risk of assets is reduced.
The liquidity of a commercial bank, therefore, is based on the constant maintenance through operational management of an objectively necessary ratio between three components: the bank's own capital and borrowed funds, on the one hand, and placed funds, on the other. The implementation of this goal involves the analysis, control and management of assets and liabilities of the bank.
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The concept of bank liquidity- its ability to fulfill its obligations to depositors, creditors and other customers in a timely manner and losses. The bank's liabilities are made up of real and conditional.
Actual liabilities are reflected in the bank's balance sheet in the form of demand deposits, time deposits, attracted interbank resources, creditors' funds.
Contingent liabilities are expressed as off-balance sheet passive (guarantees and guarantees issued by the bank, etc.) and off-balance sheet active operations (unused credit lines and issued letters of credit).
To fulfill its obligations, the bank uses the following liquid assets:
1. cash, expressed in cash balances on hand and on correspondent accounts (with the Bank of Russia and other commercial banks);
2. assets that can be quickly turned into cash;
interbank loans, which, if necessary, can be obtained from the interbank market or from the Bank of Russia;
3.other funds raised, such as the issuance of certificates of deposit and bank notes.
Distinguish between liquidity accumulated by the bank (cash, highly liquid securities), and purchased (newly acquired) (attracted interbank loans, issuance of bank bills, deposit and savings certificates). Compliance with the main features of the bank's liquidity (timely and lossless fulfillment of obligations) depends on internal and external factors that determine the quality of the bank's activities and the state of the external environment.
Internal factors include: asset quality
affecting the bank, the quality of funds raised, the contingency of assets for liquidity and liabilities by maturity, competent management, the image of the bank, the bank The quality of the bank's assets reflects three properties: liquidity, riskiness, profitability.
Liquidity of assets - the ability of assets to be transformed into cash without loss through their sale or repayment of obligations by the debtor (borrower), while the degree of possible losses is determined by the riskiness of the assets. According to the degree of liquidity, the bank's assets are divided into several groups.
The first group consists of first-class liquid assets:
1. money resources of the bank, which are in its cash desk and on correspondent accounts;
2.government securities in the bank's portfolio.
A higher share of this group of liquid assets (primary and secondary reserves) is necessary for banks that have significant and unstable deposits or an increase in demand for loans is expected.
The second group includes:
1. short-term loans to legal entities and individuals;
2. investments in interbank loans, factoring operations;
3.corporate securities held for sale.
They have a longer period of conversion into cash.
The third group of assets covers long-term investments and investments of the bank, including long-term loans, leasing operations, investment securities.
The fourth group of assets - illiquid assets in the form of overdue loans, certain types of securities, buildings and structures.
The less liquid the assets, the higher their riskiness, i.е. the potential for loss when converting assets into cash. According to the degree of risk, Instruction of the Bank of Russia No. 110-I distinguishes 5 groups of assets.
Return on assets is their ability to generate income for the bank. According to this criterion, assets are divided into income-producing (loans, investments in securities, etc.) and non-income-producing (cash on a correspondent account with the Central Bank of the Russian Federation, buildings and structures, etc.).
The bank's liquidity is also determined by the quality of the funds raised, i.е. liquidity of liabilities, stability of deposits and moderate dependence on external borrowings.
The liquidity of liabilities characterizes the speed of their repayment and the degree of revolving for the bank while maintaining the total volume of attracted funds at a certain level, reflects their term structure.
The quality of deposits depends on their stability. Demand deposits are the most stable. By opening a settlement or current account, the client establishes long-term relationships with the bank, systematically spending and replenishing the funds on the account. The balances of fixed-term and savings deposits are less stable. Their attachment to a particular bank is influenced by the level of interest rates.
The quality of the resource base is also determined by the bank's dependence on external sources (interbank loans). Interbank credit within certain limits does not pose a threat to liquidity, allows you to eliminate the short-term lack of liquidity. If it occupies the main place in the attracted resources, the unfavorable situation in the interbank market can lead to the collapse of the bank.
A serious impact on the bank's liquidity is exerted by the conjugation of assets and liabilities in terms of amounts and terms. The fulfillment by the bank of its obligations to the client involves the coordination of the terms for which the funds are invested with those for which they were provided by their depositors. Ignoring this rule by a bank operating mainly on borrowed resources leads to the impossibility of timely fulfillment of its obligations to creditors.
The ratio of the bank's assets and liabilities, as well as its contingent liabilities for the period (as of a specific date) determines the state of the bank's liquid position. When evaluating the impact of the state of a bank's liquidity position on its liquidity, it is important to keep in mind not so much the presence of mismatches in the volume of assets and liabilities by maturity, but the level of this mismatch in relation to total liabilities, as well as the dynamics of such mismatches.
In recent years, in connection with the development of active and passive operations of banks in different currencies there was a problem of providing foreign exchange liquidity, i.е. compliance of assets and liabilities in a specific currency by terms and amounts.
The internal factors of the bank's liquidity include management, i.e. a system for managing the bank's activities in general and liquidity in particular. The quality of bank management is determined by: the content of banking policy; a rational organizational structure that allows solving strategic and current tasks; a mechanism for managing the bank's assets and liabilities; clarity of procedures, including those related to the adoption of responsible decisions.
The liquidity of the bank determines such a factor as the image. The positive image of the bank gives it an advantage over other banks in attracting resources, ensures the stability of the deposit base and the development of relations with foreign partners.
The considered factors become more or less important depending on the characteristics and duration of the bank's operation, the financial condition of the founders, the circle of clients, specialization, the quality of the management team, etc.
The problem of bank liquidity can be created by the structure and quality of the resource base, the quality of assets, management, and the combination of all factors. Recognizing the multifactorial nature of the problem
liquidity of the bank, it is important to take into account its individuality, to highlight the "pain" points.
The external factors of banks' liquidity include: the political and economic situation in the country, the development of the securities market and the interbank market, the system of refinancing of commercial banks by the Bank of Russia, and the effectiveness of its supervisory functions.
It is necessary to distinguish the liquidity of its balance sheet from the bank's liquidity. The liquidity of the bank's balance sheet is one of the conditions for the bank's liquidity. It reflects such a structuring of assets and liabilities, which makes it possible to ensure their internal balance in terms of the degree of liquidity.
Along with the term "bank liquidity" the term "bank solvency" is used. In the materials of the World Bank, solvency is associated with a positive value of the bank's own capital. In some countries, the solvency of a bank is determined by capital adequacy in relation to the risk of assets.
In domestic literature, solvency is often considered as a narrower category in relation to the bank's liquidity. With this interpretation, the liquidity criterion of a bank is the contingency of all its assets and liabilities in terms of terms and amounts and the ability to provide itself with liquid assets in the event of a discrepancy; solvency criterion - sufficiency as of a certain date of funds in the correspondent account to make payments.
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Course work
Topic: Liquidity of a commercial bank
The modern banking system is one of the most important areas national economy any state. Banks have always occupied and will continue to occupy a central place in the management of the economy. The diversity and complexity of the changes taking place in banking, cause the need for their deep understanding, as well as the need to develop effective approaches to the mechanism for implementing the functions of commercial banks in the system of market relations.
The study of banking liquidity, the theoretical foundations of its management, as well as an effective mechanism for maintaining and increasing the liquidity of banks is one of the urgent tasks facing the domestic banking system both at the current stage and in the future. And this topic is the most important, since the banking system is one of the integral structures market economy.
liquidity commercial bank
The concept of liquidity of a commercial bank means the ability of the bank to timely and fully ensure the fulfillment of its debt and financial obligations to all counterparties, which is determined by the presence of sufficient equity capital of the bank, the optimal placement and amount of funds under the assets and liabilities of the balance sheet, taking into account the relevant timeframes. In particular, economists wrote about the importance of observing the correspondence between the terms of active and passive operations from the standpoint of liquidity at the end of the 19th century.
In banking literature, the term reliability is most often used. This is generally understood as a complex (integral) characteristic of the current financial and economic state of the bank and its promising foreseeable future, obtained, as a rule, on the basis of a remote (non-contact) analysis of its official and published statements.
The bank's liquidity is determined by the balance of its assets and liabilities and, to a certain extent, by the correspondence of the terms of placed assets and borrowed liabilities. Solvency is understood as reliability, that is, the ability to fulfill the obligations assumed in any situation on the market, and not in accordance with the upcoming payment deadlines.
Since banking liquidity is influenced by various features, each of which has its own specific meaning and significance for the management, analysis and control over the activities of a commercial bank, only under the condition of a comprehensive, systematic use of the entire set of features, it is possible to characterize the bank's liquidity with a certain degree of confidence in in general.
The concept of liquidity risk is given various definitions in the literature. On the one hand, liquidity risk arises due to the inability of the bank to fulfill all its obligations in a timely manner without incurring unacceptable losses, on the other hand, liquidity risk is associated with the impossibility of a quick conversion financial assets into solvent means without loss. Liquidity management risk has price(the risk is due to the price at which assets can be sold and the rate of interest at which liabilities can be raised) and quantitative components (the risk is due to the location in the bank of assets that can be sold, and the ability to purchase funds on the market at any price).
Risk control is extremely important in banking. Any management decision in banking is risky and difficult to predict, since financial sphere is very sensitive not only to various socio-economic factors, but also to political ones. The slightest instability in society has a very painful effect on the state and dynamics of all segments of the financial market. And since macroeconomic indicators are difficult to predict, it is simply impossible to completely avoid risk when making managerial decisions.
The solvency of a bank is its ability to fulfill its obligations on time and in the required amount not only to creditors and depositors, but also to the budget, insurance authorities, etc. A bank whose assets exceed liabilities is considered to be solvent, therefore equity. The solvency of banks is regulated by the National Bank through the establishment of regulatory capital adequacy ratios. According to the requirements of the National Bank of the Republic of Belarus, the capital adequacy ratio of banks should be maintained at the level of 8% of the amount of risk-weighted assets calculated in accordance with NAS.
By analyzing balance sheet data, a financial analyst can draw conclusions about the implementation of the main targets, indicators of profitability and riskiness of his operations, the balance of active and passive operations, as well as the implementation of legally established standards for the bank's activities. The analysis of liquidity indicators is also based on the information obtained from the analysis of the bank's balance sheet.
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This stage is preparatory. At this stage, the liquidity of the bank is determined at the time of the start of the analysis, here the financial analyst is faced with the task of determining the base, the starting point for further analysis. If this stage does not reveal serious problems in the field of liquidity and solvency, then it makes sense to conduct further analysis in order to determine trends and prospects for the development of the situation. If any problems are identified, further analysis will determine the causes of the current situation and outline ways out of it.
The liquidity and solvency of the bank, as well as its activities in general, are affected by a huge number of factors of multidirectional action. Therefore, when identifying emerging negative trends in liquidity, bank financial analysts need to identify the main factors that caused these trends. And also to analyze their impact and develop recommendations for changing the bank's policy in order to prevent negative consequences. So, the main chain of the second stage of the analysis is to take into account the impact of internal and external factors on the bank's policy in general, and on its liquidity in particular.
The liquidity of a commercial bank is based on the constant maintenance through operational management of an objectively necessary ratio between the three components: the bank's own capital and borrowed funds, on the one hand, and placed funds, on the other. The implementation of this goal involves the analysis, control and management of assets and liabilities of the bank.
Ratio analysis is a kind of quantitative analysis of the bank's activities, and its application to the analysis of liquidity in practice is of great importance. The method of calculating the coefficients allows you to identify a quantitative relationship between various items, sections or groups of balance sheet items; accordingly, grouping and comparison methods should also be used in parallel.
With regard to the analysis of liquidity, the method of calculating the coefficients is that, based on the calculated values obtained and control of their compliance with the established values, the financial analyst can quantify the amount of liquid assets, which should exceed the amount of forecasted, as well as unforecasted requirements at the moment and in the future.
The final and most important stage in the analysis of the bank's liquidity is summarizing the results of all the above stages of analysis, preparing analytical materials on positive and negative sides activities of the bank, the structure and balance of its assets and liabilities, quantitative and qualitative indicators of liquidity, development of recommendations for further liquidity management and preparation of forecasts for the development of the bank.
CJSC VTB Bank (Belarus) is consistently among the ten largest banks in the country and is universal bank operating in the market of the Republic of Belarus since 1996. Belonging to the international financial group VTB, which is expressed in the fact that the controlling stake in the bank (71.4%) belongs to JSC VTB Bank (Russia), allows VTB Bank(Belarus) to solve problems of any level of complexity. VTB Group is a leading international financial group of Russian origin. The mission of VTB Group is to provide financial services international level to make the future of customers, shareholders and society as a whole more secure. VTB Group's 31
CJSC VTB Bank (Belarus) operates on the basis of licenses for banking operations issued by the National Bank of the Republic of Belarus, including the right to conduct banking operations in foreign currency and operations to attract funds from individuals. In addition, CJSC VTB Bank (Belarus) has a special permit (license) for the right to carry out professional and exchange activities on securities issued by the Ministry of Finance of the Republic of Belarus, as well as other licenses for certain types of banking activities.
CJSC VTB Bank (Belarus) accepts deposits from the population and issues loans, makes payments within Belarus and abroad, deals with currency exchange and provides banking services to clients - legal entities and individuals. The head office of the Bank is located in Minsk. The Bank has 6 Regional directorates, 25 additional offices, 23 credit and cash offices and 10 operating cash desks outside the cash center in the Republic of Belarus.
For the first time in its history, the Bank's shareholders included numerous institutional and minority investors. Funds received during the IPO allowed VTB to become one of the 100 largest banks in the world in terms of equity capital. This laid a solid foundation for further accelerated growth of VTB's business and strengthening its leadership positions in international market banking services.
With the transformation into a public company, the level of openness of VTB has significantly increased. Independent directors were involved in the management of the Bank. An audit committee was formed under the Supervisory Board of VTB, and an Investor Relations Department was created within the Bank. In 2007 the international rating agency Standard & Poor's recognized VTB as one of the most informationally transparent banks.
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To limit liquidity risk, management ensures that various sources of funding are available in addition to the existing principal. bank deposits, performs asset management, taking into account liquidity, and daily monitoring of future cash flows and liquidity. This process includes estimating expected cash flows and having high quality collateral that can be used to raise additional funding if needed.
The Bank holds a portfolio of diverse, high-demand assets that can be quickly sold for cash in the event of an unexpected interruption in cash inflows. The Bank also has open credit lines, the funds from which it can use to meet liquidity requirements. Also, the Bank has a cash deposit (required reserves) with the National Bank of the Republic of Belarus, the amount of which is determined depending on the attracted funds.
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The name of indicators |
Instant liquidity, % |
Current liquidity, % |
Short-term liquidity, % |
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NB RB limit |
(30 in 2008-09) |
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Thus, in 2008-2011, VTB Bank, as a rule, with a margin, complied with all mandatory liquidity ratios established by the National Bank of the Republic of Belarus, the actual values of which are given in the table above.
We will provide more detailed analytics this year, based on the latest reporting on indicators (Table 2):
Table 2. Liquidity indicators in 2012
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The name of indicators |
Instant liquidity,% |
Current liquidity,% |
Short-term liquidity,% |
Ratio of liquid and total assets |
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standard |
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meaning |
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Source: Data financial reporting on the website of the bank CJSC VTB Bank (Belarus)
According to table 2, it is convenient to trace the values of the required liquidity ratios in 2012 on a monthly basis and compare the indicators.
Maintaining the compliance of the balance sheet structure with all liquidity requirements and norms, in the presence of constant control by the responsible divisions and collegiate bodies, allows the Bank to fulfill its obligations in a timely manner and in full, including obligations to pay principal and interest to holders of securities issued by the Bank.
In recent years, VTB Bank, as of reporting dates fully complied with the standards characterizing its liquidity. The values of the standards as of the beginning of the reporting period were higher than the minimum required.
The Bank actively manages the level of capital adequacy in order to protect against the risks inherent in its activities. The Bank's capital adequacy is monitored using, among other methods, the principles and ratios established by the 1988 Basel Capital Accord and the standards adopted by the NBRB in supervising the Bank.
The Basel Committee believes that control over the state of liquidity of commercial banks should be carried out continuously and, mainly, contribute to the prediction and prevention of possible liquidity crises. The Committee proposes to monitor the liquidity position not only for the past balance sheet date, but also to build a forecast on a daily basis for several (3, 5, 30) days in advance.
For a number of years, the Bank has been in full compliance with all external statutory capital adequacy requirements.
The primary objective of capital management for the Bank is to ensure that the Bank meets external capital requirements and maintains a high credit rating and capital adequacy ratios necessary to operate and maximize shareholder value.
The Bank manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of the activities carried out. In order to maintain or change the capital structure, the Bank may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue equity securities.
According to the requirements of the National Bank of the Republic of Belarus, the capital adequacy ratio of banks should be maintained at the level of 8% of the amount of risk-weighted assets calculated in accordance with NAS.
As of December 31, 2008-2011, the Bank's capital adequacy ratio, calculated in accordance with the above rules, was (Table 3):
Source: Financial statements data on the website of the bank CJSC VTB Bank (Belarus)
As of September 01, 2012 information on the Bank's compliance with VTB Bank CJSC (Belarus) standards for safe operation is as follows:
Table 4. Standards for safe operation
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Minimum amount of regulatory capital |
RUB 261,750.0 million |
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Bank indicator: |
RUB 485,917.3 million |
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Regulatory capital adequacy ratios |
Standard value: regulatory capital adequacy |
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Bank indicator: |
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Standard value: capital adequacy |
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Bank indicator: |
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Ratio of the ratio of attracted funds of individuals and bank assets with limited risk |
Standard value: |
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Bank indicator: |
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The size of the special reserve to cover possible losses on assets exposed to credit risk |
Estimated reserve amount: |
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End of table 4. |
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The size of the special reserve to cover possible losses on contingent liabilities exposed to credit risk |
Estimated reserve amount: |
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The amount of the actually created reserve: |
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The amount of the special reserve for the depreciation of securities |
Estimated reserve amount: |
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The amount of the actually created reserve: |
