NAVIGATING THE LOW INTEREST RATE LANDSCAPE: ASSESSING LIQUIDITY POSITIONS OF EU BANKS UNDER THE LCR CONSTRAINT

• Authors: Hanzlík Petr , Teplý Petr
• Languages of publication: EN

Abstracts

EN

This paper explores the impact of the Liquidity Coverage Ratio (LCR) as a binding constraint on banks. Using a panel dataset encompassing 707 banks located in EU countries over the years 2012 to 2018, we analyse the phased introduction of the LCR, starting at 60% in 2015 and reaching full implementation at 100% in 2018. Our research reveals a positive effect of the LCR on liquidity buffers and a negative impact on the loan-to-deposit ratio, indicating strengthened liquidity positions. Contrary to expectations, estimations across five bank types demonstrate a significant LCR impact on all categories. Additionally, the study investigates the adverse effects of low or negative interest rates, particularly affecting cooperative and savings banks. Based on these findings, we recommend that policymakers maintain a vigilant approach to liquidity regulations, ensuring their adaptability to diverse bank types and considering measures to alleviate the negative impact of prolonged low or negative interest rate environments on specific bank categories.

Keywords

EN

BANKS; INTEREST RATES; LIQUIDITY RISK; LIQUIDITY COVERAGE RATIO; EU

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2024
• Volume: 72
• Issue: 5-6
• Pages: 211 – 234

Contributors

author

Hanzlík Petr

• Prague University of Business and Economics, Faculty of Finance and Accounting, Winston Churchill Sq. 1938/4, 13067 Prague 3, Czech Republic

• https://orcid.org/0000-0002-8706-8125

author

Teplý Petr

• https://orcid.org/0000-0002-4014-918X

Identifiers

DOI

https://doi.org/10.31577/ekoncas.2024.05-06.01