Basel II/III: Liquidity Regulation and Supervision in the Banking Sector : Case study: Liquidity Position of the Major Banks on the Finnish Market
Pátek, Jiří (2014)
HAAGA-HELIA ammattikorkeakoulu
2014
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2014100414463
https://urn.fi/URN:NBN:fi:amk-2014100414463
Tiivistelmä
In the aftermath of the financial crisis that started in 2008, it was evident that there is a need to apply prophylactic measures in the banking sector in order to avoid crises of such an extent in the future. Consequently, the Basel II based legislation will be globally replaced with legislation implementing the Basel III rules. In the Basel III accord introduced in 2010, the topic of banks’ liquidity and funding has attained special attention.
The primary aim of this paper is to analyze the liquidity and funding positions as well as liquidity and funding risk management of three major banks operating on the Finnish market and to find out whether there are liquidity problems on the Finnish banking market.
The secondary objective is to introduce the regulatory background that determines the quantitative and qualitative requirements for liquidity and funding as well as liquidity and funding risk management globally and in the European Union. Additionally, the paper presents the tasks and competencies of the supervisory authorities in the European Union.
The paper introduces both the Basel II and the Basel III requirements. The Basel II rules are presented because the primary research material is based on the Basel II compliant legislation valid in 2013. The theoretical part of the study then focuses on the Basel III rules due to their future importance.
In the European Union, the Basel III rules are implemented through the Capital Requirements Directive IV and the Capital Requirements Regulation. Generally, the Basel III rules mean the tightening of liquidity requirements for financial institutions. Newly, the quantitative liquidity and funding requirements - the Liquidity Coverage Ratio and the Net Stable Funding Ratio - are included in Pillar I. With regard to Pillar II, the Internal Capital and Liquidity Adequacy Assessment Process as well as the Supervisory Review and Evaluation Process have been enhanced. The Pillar III requirements are handled in the study to the necessary extent.
The research of the sample companies was conducted by using qualitative methods and primary sources presenting the companies’ last available annual data (2013). The findings indicate that the liquidity and funding positions of the sample companies are stable. However, the companies may face some challenges when the Basel III compliant legislation will enter into force. Due to the representativeness of the sample, it can be concluded that there are currently no liquidity problems on the Finnish banking market.
The primary aim of this paper is to analyze the liquidity and funding positions as well as liquidity and funding risk management of three major banks operating on the Finnish market and to find out whether there are liquidity problems on the Finnish banking market.
The secondary objective is to introduce the regulatory background that determines the quantitative and qualitative requirements for liquidity and funding as well as liquidity and funding risk management globally and in the European Union. Additionally, the paper presents the tasks and competencies of the supervisory authorities in the European Union.
The paper introduces both the Basel II and the Basel III requirements. The Basel II rules are presented because the primary research material is based on the Basel II compliant legislation valid in 2013. The theoretical part of the study then focuses on the Basel III rules due to their future importance.
In the European Union, the Basel III rules are implemented through the Capital Requirements Directive IV and the Capital Requirements Regulation. Generally, the Basel III rules mean the tightening of liquidity requirements for financial institutions. Newly, the quantitative liquidity and funding requirements - the Liquidity Coverage Ratio and the Net Stable Funding Ratio - are included in Pillar I. With regard to Pillar II, the Internal Capital and Liquidity Adequacy Assessment Process as well as the Supervisory Review and Evaluation Process have been enhanced. The Pillar III requirements are handled in the study to the necessary extent.
The research of the sample companies was conducted by using qualitative methods and primary sources presenting the companies’ last available annual data (2013). The findings indicate that the liquidity and funding positions of the sample companies are stable. However, the companies may face some challenges when the Basel III compliant legislation will enter into force. Due to the representativeness of the sample, it can be concluded that there are currently no liquidity problems on the Finnish banking market.