engleski

In compliant with liquidity prudential framework: effects and challenges of EU banking system

The main objective of this paper is to identify the bank business activities towards the implemented strong new liquidity measures using panel data analyses of the European Banking System after the last financial crises. Therefore, the research is in line with other current empirical works regarding the banking firms’ post-Basel III Standard adjustment as a whole. The previous heuristic approach in liquidity management is being replaced by quantitative measures of liquidity coverage ratio (LCR) and net stable funding ratio (NSFR). The research hypothesis assumes that new liquidity measures encourage banks to increase the liquid and low-profit assets whereas high ratio of liquid assets can disrupt the fundamental functionality of the banking system and its lending activities to corporate and private sector. Moreover, we found the evidence that the banking sector adjusted their asset and liability structures in order to meet tighter liquidity regulation through the internal strengthening of the capital structure, primarily using the retained earnings, recapitalization by existing shareholders but also through hybrid and extraordinary conversion of debt into the share capital. In unchanged market conditions and without changing the operational business model it has a positive effect on maintaining regulatory requirements, even though could ultimately lead to an increase in the cost of capital transferring the same to customer structure through increase of the net interest margin, weakening the credit cycle as a whole. Finally, during the history every financial crisis have shown that bank liquid assets cannot cover liquidity needs of financial system as a whole and the role of the lender of last resort (LOLR) is necessary. Empirical analysis will be done on the sample of 22 publicly listed banking firms in the European Union in the period from 2007 to 2019 using the dynamic model with Generalized Method of Moments (GMM). The results of the research are dedicated to the scientific and professional public, bank management structures in daily management as well as regulatory authorities in the function of creating and correcting macro and micro prudential regulatory policies contributing in the reaffirmation of traditional financial intermediation with lower rates of bank assets growth and moderate cyclical economic activity.

regulatory requirements, liquidity coverage ratio, net stable funding ratio, dynamic panel models, European banking sector

nije evidentirano