Non-price Limitation of the Credit Size as the Mechanism of the Influence on the Commercial Banks Liquidity

• Main Author: A. Stakhovskyi
• Format: Article
• Language: English
• Published: LLC "CPC "Business Perspectives" 2010-03-01
• Series: Економіка розвитку
• Subjects: mortgage market; mortgage; interest rate; price regulation; the initial contribution of liquidity.
• Online Access: http://www.ed.ksue.edu.ua/ER/knt/e101_53/e101stah.pdf

Modern liquidity managerial models have been analyzed and real state of liquidity of domestic commercial banks has been characterized in this article. The state of mortgage credit and the influence of the commercial banks of marketregulation have been analyzed. The ways of optimization liquidity management have been determined with the purpose of limitation of the sharp worsening of economics and bank system under the future prices phenomena.Bank experience has many liquidity regulation mechanisms, beginning from the control of the norms of the central bank as to the mathematical approaches and assets and liabilities management. Various liquidity management models have been developed and used in practice such as the model of the passive evolution, the model of the liquidity breaking, pay calendar management, gap model, optimal balance structure. But not a single model has not considered the influence namely of the credit amounts on the liquidity risk, and the most particular adequacy of the price on the objects which are credited according to the development of country economy. Such situation when the extreme increase of the price in times led to the doubts of the adequacy of the credit amounts from the view point of the provision of the liquidity in future has not been considered. The situation might be under the control in case of the usage of the mechanisms of influence as to the demand of crediting: interest rate increasing, reducing of the credit terms, increasing of the initial investment. This article underlines that the credit amount regulation is reliable to be carried out through non-price factor, such as the amount of the initial investment for the object of crediting. In this case the price on credit resources would be unchanged but non-price regulation would limit the sizes of the given credits. Future state of the liquidity limitation of the credit would be influenced in such a way: the less the size as to one credit allocated by one bank to one borrower on the background of the rapid increase of the price on the object of crediting the more probability that the borrower would be able to pay at least the part of the debt under crises. Non-price regulation would really reduce the bank profit but such decrease would go on according to the smooth dynamics and secure much liquidity under crises and also, which is the most important, would reduce extreme losses incurred by banks from non-repayment.For the aim of saving of the liquidity on the relatively stable level in future crises, the banks must much rely on the return of credits by small amounts, and according to this to carry out grouping of assets to secure long-term liquidity. The assets should be grouped according to the amount of credits. The more the amount of credit, the much credit risk grows, which to the most extent determines liquidityrisk of the domestic bank system.