Liquidity of the Commercial Bank
Liquidity means, in a literal sense, lightnessrealization, which implies the transformation of values of a material nature into cash. There are such concepts of liquidity as market, bank, balance and assets liquidity.
Liquidity of a commercial bank implies its solvency. The bank is liquid if the total amount of all its cash, other liquid assets and the ability to raise funds from its own sources in a short time are sufficient to pay off all financial and debt obligations.
In addition, the bank must have a liquid reserve, which is necessary to meet the emerging financial needs. Obligatory reserves of commercial banks in many respects are able to secure the position of the bank in the event of unplanned circumstances.
Liquidity management of a commercial bank implies practical measures to monitor the status of all liquidity indicators and the willingness to respond to any kind of deviations from the norms.
In theory, such directions of increasing the liquidity of the bank As claims for redemption issued beforedemand for loans, non-renewal of loans, expansion of passive operations, issue of certificates of deposit, sale of a certain part of the securities portfolio, and loans from the Central Bank.
To maintain a stable position, the bank shouldhave a certain liquidity reserve. It is necessary to cover unforeseen obligations caused by various external and internal circumstances.
Liquidity of a commercial bank depends on the political situation of the country,the state of the entire money market, the possibility of refinancing by the Central Bank, the state of the securities market, the improvement of banking legislation, the reliability of customers, the nature of management in the bank, the provision of equity capital, etc. factors.
Central banks regulate the liquidity of a commercial bank through the establishment of restrictions,the limits of the debt of one borrower, the control over the issuance of loans in especially large amounts, the system of refinancing and mandatory reservation of a certain part of the funds raised, interest rate policy, securities transactions, etc. In Russia, the solvency of commercial banks is also subject to regulation.
To maintain liquidity, the bank needsto forecast the situation of possible outflows of "demand" and "unreliable" time deposits, growth in demand for loans and other factors of the economic situation.
To manage liquidity, the bank must competentlydistribute assets and liabilities. To this end, the accounts tables are created and determine which part of the liabilities should be placed in the liquid articles of active accounts in order to prevent a decrease in the liquidity ratio.
Liquidity of a commercial bank depends on the state of its assets. Depending on the ease of transferring money into cash, the bank's assets are divided into liquid and illiquid.
Liquid funds are in the immediatereadiness. This is a cash register, first-class bills, precious metals, government securities, funds on a correspondent account with the Central Bank.
The liquid assets that are indisposal of the bank, and can be converted into money, these are loans and payments to the bank for a period of no more than one month; conditionally sold securities; other values (including intangible assets).
Illiquid assets are unreliable debts; overdue loans; investment in real estate, buildings and facilities of the bank; unquoted securities.
To maintain the liquidity of the bank, you can not raise funds on a short-term basis with long-term funds.
The liquidity of a commercial bank (its level) is assessed in practice by comparing its liquidity indicators with the norms established by the Central Bank of Russia.
