Liquidity Risk Management In The UK Banking Industry

Journal Name: 
Journal of Accounting and Finance
Volume: 
Vol. 32 - No. 1
Authors: 
Author Name Designation Organization
K. Madhava Rao
Abstract: 

In the aftermath of the 2008 global financial crisis, many theorists and studies put forward assumptions and positions explaining the causation or development of the credit crunch. At the same time, they suggested measures to manage risk and prevent the occurrence of such a crisis in the future. Since the crisis was primarily about the drying-up of liquidity, this study aims to focus on apprising the issue of liquidity, liquidity risk assessment, and approaches to managing such a risk within an economy. Studies indicate that liquidity crises are not overly rare as people might have assumed in the pre-2008 crisis era. This is especially because companies lack sufficient incentive to build-up enough resilience into their stresses of liquidity and thus hold enough levels of liquidity to guard against such a crisis. The core question here is whether the regulators are justified to force banks to adopt policies and measures that could lead to higher liquidity management standards, which will also advance the risk measurements of liquidity.