1.1. Introduction
CHAPTER 1
INTRODUCTION
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In this chapter, the thesis will present an overview of the research, including: reasons for choosing the topic, stating the research problem and research questions, setting research objectives and choosing research methods to achieve the stated research objectives.
1.2. Reasons for forming the topic
Liquidity risk is the most serious risk among banking risks, because it not only threatens the safety of each commercial bank, but also relates to the safety of the entire banking system.
The global financial crisis and economic recession began in the US in late 2007, but really exploded and had a strong impact on the whole world, when large banks that had been around for many years went bankrupt or were on the brink of bankruptcy due to lack of liquidity.
The Vietnamese banking system has not fallen into the vortex of the crisis because the basic liquidity is guaranteed. However, this does not mean that we lose vigilance with liquidity risks; moreover, it must be considered a daily task. With the desire to learn about the liquidity issue at commercial banks in Vietnam today, the research topic: " Factors affecting the liquidity of Vietnamese commercial banks " aims to learn about the main factors affecting the liquidity of Vietnamese commercial banks and provide a clearer view of this issue in the current period.
From the writer's observation and information search, currently in Vietnam there are not many official and complete quantitative studies on financial factors affecting liquidity risk of Vietnamese commercial banks. Therefore, the topic is built to survey the financial factors affecting the liquidity of Vietnamese commercial banks.
1.3. Research objectives
Research on factors affecting liquidity of banks
Vietnam trade
Research on the level of influence of factors affecting liquidity
of Vietnamese commercial banks.
1.4. Research questions
What financial factors affect the liquidity of banks?
Vietnam trade?
What is the level of influence of financial factors on the liquidity of Vietnamese commercial banks?
1.5. Scope of research subjects
Research subjects: domestic commercial banks, excluding joint venture banks and foreign bank branches.
Research scope: includes 30 commercial banks, which are state-owned commercial banks, state-owned commercial banks, and joint stock commercial banks in Vietnam.
Data collection time: On February 24, 2011, the Government issued Resolution No. 11/NQ-CP on key solutions focusing on curbing inflation, stabilizing the macro economy, and ensuring social security. This Resolution stipulated that the credit growth rate in 2011 was below 20%, and in 2011, the credit growth rate was 10.7%, the lowest level in the history of the banking industry at that time. By 2012, continuing to implement the policy of curbing inflation, stabilizing the macro economy, along with the economic recession, the credit growth rate only reached about 7%. Thus, the performance of banks in these two years was too much affected by objective factors. Therefore, the author chose the data collection period from 2005 to 2010, a period when there was not much impact from objective factors on the operations of banks.
1.6. Research methods
This study uses quantitative research methods. The author collects tabular data for independent variables including: Bank size, profitability on total bank assets, ratio of total short-term debt / bank equity, ratio of total outstanding loans / total customer deposits and ratio between bank equity and total bank assets ... of 30 Vietnamese commercial banks based on financial reports from 2005 to 2010.
After collecting enough data, we use regression model for all data.
Panel data.
After conducting multivariate regression, run the tests. Conduct factor analysis, consider the level of influence of each factor on the liquidity of commercial banks. Give personal comments based on the analysis results, from which propose opinions and recommendations.
1.7. New points of the topic
This study is based on the study of Vodová (2011) on the impact of factors on liquidity of commercial banks in the Czech Republic in the period from 2001 to 2009 and Muhammad Farhan Akhtar, Khizer Ali, Shama Sadaqad (2011) to apply the study of factors affecting liquidity in commercial banks in Vietnam.
Applying the econometric model into practice, on the basis of the built model, each independent variable is analyzed to see the impact of each factor on liquidity in commercial banks in Vietnam.
Based on the analysis of those factors, the author makes suggestions and recommendations based on the results achieved.
1.8. Structure of the topic
The structure of the thesis includes 04 main chapters, after the main chapters are the references and appendices presented in the following order:
Chapter 1: Introduction.
Chapter 2: Theoretical basis, models and research methods.
Chapter 3: Analysis of research results.
Chapter 4: Conclusion and recommendations. General conclusion.
References. Appendix.
CHAPTER 2
THEORETICAL BASIS, MODELS AND RESEARCH METHODS
2.1. Introduction
Chapter 1 presents an overview of the research content, including a brief introduction to the role and position of liquidity in the operations of banks, the reasons for forming the topic, research objectives, research objects and scope, and practical significance of the topic. Chapter 2 will introduce the theoretical basis, models and research methods, including the following main parts: the concept of bank liquidity; causes of liquidity risk; the impact of liquidity risk on banking operations; factors affecting bank liquidity; summarizing some research models on factors affecting bank liquidity, presenting the research model, presenting the method of data collection and processing of collected data.
2.2. Theoretical basis
2.2.1. Concept of bank liquidity
According to Basel (2010), “Liquidity or the ability to meet capital sources for increasing assets and paying debts when due is extremely important for the existence of any bank”.
According to Rose (2001), “Bank liquidity is the ability of a bank to obtain available funds at low cost at the right time when the bank needs them”. This suggests that a bank has good liquidity when it has a reasonable amount of available funds or can quickly raise funds through borrowing or selling assets. Accordingly, bank liquidity often has a very large time significance. Most of the liquidity requirements of banks are immediate or almost so. Most liquidity problems arise from outside the bank due to the financial activities of customers. In fact, customers' liquidity problems are often transferred to the bank. If customers lack capital in liquidity, they can make
borrowing from the bank or withdrawing money from its deposit account. Both of these require the bank to meet additional funding needs. We can describe the bank's liquidity requirements in terms of supply and demand as follows:
Liquidity demand is made up of the following main factors:
- Depositors' demand for withdrawal: this is the main liquidity demand, regular, immediate and unconditional; including all types of non-term deposits, check-issued deposits, term deposits that can be withdrawn before maturity, term deposits with payment upon maturity, payment of bills and bonds upon maturity, etc.
- The legitimate credit needs of customers to pay for goods and services that the bank commits to provide. These are credit relationships that the bank wants to maintain and meet, including the need to grant new credit, extend when the loan is due, use the credit limit or fulfill credit commitments.
- Loans due for repayment: this is a credit relationship in the money market including repayment of loans from other banks, from the central bank and repurchase agreements.
- Operating expenses and tax payments: include expenses related to operating expenses, such as salaries, bonuses, social insurance, business expenses, asset purchases, expenses for using services of other units, and taxes of all kinds.
- Dividend payment to shareholders: includes dividend payment for all types of shares
Bank issued voucher.
- In the demand for liquidity, there are two important parts for banks. That is the demand for withdrawal and the demand for borrowing money from customers. The first type is associated with the money mobilized by the bank, the second type is associated with the creation of new assets. When mobilized, the funds immediately increase the bank's treasury (ie increase the liquidity supply), and at the same time also create demand.
The difference in the maturities of cash inflows (liquidity supply) and cash outflows (liquidity demand) creates a difference in liquidity supply and demand.
The way banks manage liquidity demand is very important.
important to the security of the system. Here are some key points:
- Analyze past liquidity needs to see fluctuations in
these needs and the factors that influence them.
- Measure the relationship between influencing factors and liquidity needs to determine the frequency and magnitude of changes in liquidity needs.
- Analyze and quantify liquidity needs for each type of deposit, each customer group and each period of the year. Commercial banks predict liquidity needs based on analysis of cash flows withdrawn in the previous period and take into account possible changes in this period. The calculation period can be daily, weekly, monthly, yearly or many years...
Determine liquidity supply:
Asset-side liquidity management - reserve strategy: banks must maintain the ability to meet liquidity needs. Liquidity supply can be created from two sides: the asset side and the capital side (or from two ways: maintaining reserves and mobilization capacity). According to the internal management school, liquidity needs from the asset side can be met through the form of reserves. This view holds that maintaining the liquidity of assets through asset management can provide liquidity. From the risk perspective, this means that banks need to create assets that are appropriate in terms of time, volume and structure of resources.
Asset-side liquidity management - liquidity reserve strategies include:
- Maintain a budget of appropriate size and structure.
- Analyze asset liquidity through the ability to convert assets into cash.
- Selecting an asset portfolio suitable to the specific conditions of each bank to ensure liquidity through appropriate liquidity ratios, or through predicting upcoming liquidity needs.
- Adjust the liquidity of an asset by changing the maturity structure of the asset, or creating a market for the asset, in order to change the liquidity of the asset.
Budget analysis:
A bank usually meets the payment needs of customers with funds: cash in the safe, deposits at the State Bank and other credit institutions. If a customer has a savings deposit at the bank, the bank will simply withdraw cash to pay; if a customer has a balance in a payment deposit account, signs a check or a payment order to pay a customer at another bank, the bank will use deposits at the State Bank or deposits from credit institutions to pay... If a customer has a payment need but does not have or does not have enough money, the bank can lend (after appraisal and credit approval) for the customer to pay. The lending can be in the form of cash or transfer... loans due for repayment (borrowing from the State Bank or issuing bonds, the bank pays in cash or transfer... These activities take place daily at the bank to help customers make timely payments and investments.
Factors that increase or decrease the treasury and treasury policy: treasury (a part of the bank's reserves) includes the most liquid assets of the bank, which are regularly supplemented from cash inflows such as increased deposits, loans, debt collection, securities held by the bank due for payment... and are also regularly used to pay deposits, loans, investments... The increase or decrease in treasury can be due to customer factors.