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Banking liquidity as a leading approach to risk management

Abstract

For the modern model of the market there are inherent existence of both a set of possibilities and a large number of hazards that are waiting for economic agents and which are generated by the need to make decisions in the conditions of considerable uncertainty about the future. Liquidity risk is one of the central places in the system of bank risks, is closely related to solvency and financial stability, and therefore its management is an extremely important element of financial management of the bank. This paper is devoted to the consideration of theoretical approaches to the management of bank liquidity risks, as well as understanding the risk of unbalanced liquidity and its place in the system of bank risks. In the course of the study, the essence of the concepts of uncertainty, risk as such, economic risk and its varieties, including banking is gradually clarified. We offer our own definition of "bank risk" and describe its essence. Based on the understanding of the concepts of bank risks, liquidity balance, bank liq uidity, the essence of the risk of unbalanced liquidity is disclosed, its characteristics and main aspects of management are determined. In determining the risk of liquidity as a probability of a future state, when the bank may suffer losses due to the imbalance of demand for liquidity and availability at a certain point in time, we believe that the essence of liquidity management is reduced to the maximum balance of demand for liquid assets and their actual availability in a certain moment of time using special tools. Our paper also reveals the mechanism of information influence on bank liquidity and its leading role in liquidity risk management processes. Moreover, the paper discloses the conceptual constituents of organizational support for bank liquidity risk management

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oai:philpapers.org/rec/ARZBLALast time updated on 4/29/2020View original full text link

This paper was published in PhilPapers.

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