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How liquid are banks: Some evidence from the United Kingdom

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journal contribution
posted on 11.06.2018, 11:21 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

School

  • Business and Economics

Department

  • Economics

Published in

Journal of Banking Regulation

Volume

18

Issue

2

Pages

163 - 179

Citation

YAN, M. ...et al., 2017. How liquid are banks: Some evidence from the United Kingdom. Journal of Banking Regulation, 18(2), pp. 163-179.

Publisher

Palgrave

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2017-05-03

Notes

This is a post-peer-review, pre-copyedit version of an article published in Journal of Banking Regulation. The definitive publisher-authenticated version YAN, M. ...et al., 2017. How liquid are banks: Some evidence from the United Kingdom. Journal of Banking Regulation, 18(2), pp. 163-179. is available online at: https://doi.org/10.1057/jbr.2016.3

ISSN

1745-6452

eISSN

1750-2071

Language

en

Exports

Loughborough Publications

Exports