Can Basel III Liquidity Risk Measures Explain Taiwan Bank Failures?

• Main Authors: Chung, Yung-Jen, 鍾詠任
• Other Authors: Chang, Chia – Chien
• Format: Others
• Language: en_US
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/487756

碩士 === 國立高雄應用科技大學 === 金融系金融資訊碩士班 === 103 === In December 2010, the BCBS (2010a) strengthened its liquidity framework by proposing two quantitative indicators for liquidity risk in Basel III: the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). Whether the new liquidity risk indicators are effective to measure the liquidity risk of bank thereby reducing bank failures is an issue of concern. Thus, this study uses a quarterly data of Taiwan banks from 2006 to 2013 and uses the panel multiple regression model to investigate the effectiveness of LCR and NSFR in Taiwan banks. We also study the effectiveness of the Spread and several liquidity risk indicators used in Taiwan based on Principles for Sound Liquidity Risk Management and Supervision (PSLRMS). Moreover, we test the liquidity risk majored from systematic or non-systematic risk and consider the size effect and time effect to compare the result. The result shows that all liquidity risk indicators can explain empirical distance to default (EDD) significantly, for big-scale banks, LCR is more important than NSFR, but for small-scale banks, NSFR is more important. In crisis period, the Spread and LCR are significant in big-scale banks, but no indicators are significant in small-scale banks. After crisis, both big and small-scale banks are affected by the Spread, and NSFR and LCR are significant in small-scale banks and in big-scale banks, respectively.