Максименко Кристина Викторовна

Целью данной статьи является анализ теоретических основ управления рисками банковской ликвидности в текущих экономических условиях Казахстана. Во-первых, будут определены риски банковского учреждения и текущая концепция управления риском ликвидности для казахстанских коммерческих банков. Модель состоит из управления риском ликвидности политики, определения роли активами и пассивами, эффективного управления информационной системой и наладки системы внутреннего контроля для управления ликвидностью.
Проанализировав факторы, влияющие на активы и обязательства, банки должны создавать методику, чтобы уменьшить дисбаланс ликвидности с помощью ликвидных финансовых инструментов для удовлетворения потребностей в ликвидности.
В заключение отметим, что модель создана чтобы помочь банкам надлежащим образом управлять ликвидностью в текущих сложных экономических условиях.


Maximenko Kristina Victorovna

The purpose of the paper is to analyze the theoretical basis for managing banking liquidity risk in current economic conditions of Kazakhstan. Firstly, the risks in banking institution will be identifies, then the current concept of liquidity risk management for Kazakhstani commercial banks will be discussed. The model consists of establishment of liquidity risk management policies, identification of the roles of Assets and liabilities committee, effective management of information system and, setting-up the internal control system for liquidity management.
Having analyzed the factors causing assets and liabilities mismatch, the banks should create techniques to reduce the liquidity imbalance by using liquid financial instruments to fulfill the needs for liquidity.
In conclusion, the model is expected to assist banks to appropriately manage liquidity in the current challenging economic condition.

Keywords: Assets and liabilities committee, Assets and liabilities management, Banking management, Liquidity Risk


Библиографическая ссылка на статью:
Максименко К.В. Managing Banking Liquidity Risk on the Example of Kazakhstan commercial banks // Современные научные исследования и инновации. 2012. № 8 [Электронный ресурс]. URL: https://web.snauka.ru/issues/2012/08/16547 (дата обращения: 03.06.2024).

In spite of the great interest of economists to the problem of liquidity management in banks and an increase in the theoretical and practical developments in the methodology of bank financial analysis there is still absence of unified methodology and methodological framework that allows evaluating liquidity which is one of the most important indicators of financial stability of a bank. Internal banking analysis of liquidity helps to identify, assess and predict the likelihood of internal problems in the bank.

The results of the analysis are fundamental for decision making and strategy setting of a bank. Liquidity management is very important to maintain the stability and efficiency of commercial banks and, consequently, banking system as a whole.

The banking system of Kazakhstan has been heavily affected by the global financial crisis. Dependence on the external financing from major banks with limited refinancing opportunities and narrow the domestic market led to a slow decrease in lending and financial performance of all banks. Since autumn 2008 decline in income and the deterioration of asset quality became the dominant trend in the banking system of Kazakhstan. After the period of steady growth, supported mainly by the external borrowing, the growth had been slowed significantly, from 30% increase in 2007 to a negative 5% in 2008. Given the global liquidity crisis, domestic banks had no alternative are relatively cheap options to attract foreign funds. [[1]] And in 2012 the problem is still taking place. In its latest report on Kazakhstan the reputable rating agency Moody’s expressed the negative outlook for credit conditions in the banking system of Kazakhstan. The view is based on providing the poor provisioning and under-capitalization of domestic banks, their subdued appearance of credit and lack of access to wholesale capital markets.[[2]]

The abovementioned puts a big pressure on the banks to manage the liquidity more and more effectively.

The liquidity management problem was developed by many authors, mainly foreign and Russian, there is lack of related sources among Kazakhstani literature.

It is also worth to mention the recommendations of the National Bank of Kazakhstan in the question of regulation of the liquidity risk in banking system. There are many norms aimed to regulate the liquidity risk which are continuously developing and becoming stricter and stimulate the development is not a pre-existing intra procedures for risk assessment and liquidity management. However, all the theoretical guidelines of CIS and foreign authors, requirements of the National Bank of Kazakhstan, in practice, in each bank should be constructed into the whole system, the mechanism of liquidity management, taking into account the business peculiarities.

The practical aspect of the construction and application of approaches to management of bank liquidity is described in the domestic and foreign literature. The authors consider only with the individual components of the mechanism of liquidity management (such as the analysis of bank performance, the requirements for information infrastructure), but do not give an answer to the question of the practical construction of an integrated system liquidity management, the bank needed. In practice, every bank there has a difficulty in applying all the proposed approaches by the authors in practice.

Liquidity Risk in commercial banks

Risks in commercial banks

Risk is defined as the probability that the actual returns may differ from the expected ones (Howells and Bain, 1999 [[3]]). There are the following general categories of risks in financial institutions:

  • · financial risks;
  • · business risks; and
  • · operational risks (Ivanov, 2000 [[4]])

Financial risks refer to those coming from banking activities whereas business risks and operational risks refer to the internal activities of the banks.

According to the abovementioned, liquidity risk is related to financial risk category together with credit risks and market risks.

As it has been mentioned in the introduction, there are both economic and non-economic conditions which influence operations of a bank. The factors may cause financial risks, business risks and operational risks which after that may create the liquidity risk due to the interrelations between liquidity risk and other banking risks. Certainly, the global financial crisis happened in 2007-2009 took place due to the failures in derivatives markets which affected the ability of banks to provide liquidity to the third parties (Viral, 2011 [[5]]).

Therefore, the joint efforts of bank management, stakeholders, banking regulators and public are needed to set up the reliable foundation for a bank liquidity management.

Generally speaking, liquidity risk management in banks is simply the risk of inability of getting funds avoiding significant costs (Ivanov, 2000 [4]). This happens when the depositors collectively decide to withdraw more funds than the bank has in cash a t the moment.

In reality, the banks usually maintain imbalances between asset and liability sides that need to be equalized because banks a keeping liquid liabilities but invest liquidity in less liquid assets (Zhu, 2001[[6]]). In case the bank fails to balance such mismatch, liquidity risk occurs followed by insolvency risk, reputation risk and even default. These failures or inappropriate management of liquidity is determined by how strong the liquidity pressure is; whether the bank is prepared some liquid instruments available for selling and opportunity of the banks to find liquid sources either inside or outside the banks.

The Process of Liquidity Risk Management

Taking into consideration the current economic conditions, the National bank of the Republic of Kazakhstan required all the commercial banks holding Kazakhstan license to organize the liquidity management process to identify, measure, monitor and control the liquidity risk. The process if covering the following:

  • · the liquidity management policies of the Board of Directors;
  • · the roles of asset liability committee (ALCO);
  • · the roles of internal control system for liquidity management;
  • · the effective information system for monitoring and reporting liquidity risk (Instruction # 359 by the Agency of financial supervision of the Republic of Kazakhstan [[7]]).

Liquidity management policies

Liquidity management policies are different in different banks, however at least four components below should be incorporated in the policies as per NBK requirements:

  • · The policy must contain the specific goals and objectives with respect to managing liquidity, including the short-term and long-term liquidity management strategies;
  • · It determines the roles and responsibilities of the bodies involved in liquidity management process, including asset and liability management policies and, relationship with the other financial institutions and regulators.
  • · The liquidity policy determine the structure of identification, reporting, monitoring and reviewing the bank liquidity conditions;
  • · It identifies the liquidity risk tolerance and prepares the contingency plan to handle and mitigate liquidity pressures.

Asset and Liability Committee (ALCO)

There are the following main responsibilities of ALCO:

  • · Integration of the liquidity management policies, objectives, and strategies of the upper level bodies into the operational level and managing the liquidity adhering to their lines of authority and responsibility.
  • · Ensuring the correctness and relevance of the liquidity management process within their area of responsibility;
  • · Monitoring the integration of liquidity management process and delivering the reliable information to the upper level bodies.

Effective Information System for Monitoring and Reporting

One of the most effective schemes has been proposed by the Bank of International Settlements. According to the scheme senior managers assign their subordinates, monitor the implementation of liquidity management process and report to the decision makers based on the internal reports of the subordinates. Thus, the decision makers coordinate and monitor the entire implementation of liquidity management process. The decision makers also receive internal reports, prudential reports and market information from the decision followers. In some cases, the management of the banks publishes such reports for the public disclosure to enable market participants to make an informed judgment about the soundness of the bank liquidity risk management framework and liquidity position (Bank of International Settlement, 2008[[8]]). The information system is a complete coordination and relationships between the decision makes, subordinates and all related parties in the bank ensures a reliable method to manage and control the liquidity risk.


Internal Control System for Liquidity Management

In order to monitor of the liquidity management process, the banks should have an internal control system to ensure the fulfillment of the obligations for implementation of liquidity management policies by the subordinates with the one prescribed by the top management.

Methods of mitigation of the liquidity risk

In order to manage the current liquidity needs the banks should have a liquid part on the assets side of the balance sheet.  The larger banks are required to hold larger liquid assets than the smaller banks. The liquid assets refer to:

  • · Cash in hand;
  • · National Bank certificates;
  • · Other commercial bank deposits.

In case of liquidity risk event the bank will use these liquid instrument to fulfill liquidity risks. Apart from using the short-term financial instruments, the banks also have a chance to terminate the long-term financial instruments in order to satisfy the short-term liquidity needs, for example, to sell such long-term instruments as Ministry of Finance bonds. These financial instruments are very liquid on the market.

When the internal sources of bank liquidity are not sufficient for liquidity demand, the external sources could be used.

The first alternative is to ask for the support the shareholder. It is worth to mention that in current legislative framework international banks cannot borrow from the mother bank the amount > 10% from the capital. Another alternative, which needs extra requirements, is borrowing some funds from the money from another bank. But there is a significant drawback of the source due to the reason that external borrowing is, firstly, quiet expensive, secondly, it causes a reputational risk as a sign of internal problem of the bank.

The final source of liquidity is to borrow liquidity from the National Bank. The National Bank has an emergency liquidity facility as by nature it is a lender of last resorts.


In daily activities the commercial banks might face liquidity risk as the results of asset-liability imbalance and maturity mismatch. In order to properly handle the risk, the banks must establish liquidity management processed which refer to 1) creation of liquidity management policies; 2) organization of Asset and Liability Committee (ALCO); establishment of an effective information system and internal control; and finally, development of the techniques to manage the liquidity risk. The Board of Directors is responsible for creation of the bank liquidity management policies in cooperation with ALCO and risk management department. Then, an appropriate information system and internal control on liquidity management should be created to monitor the liquidity management process. Having analyzed the major factors of liquidity risk the bank should develop liquidity contingency plan for different scenarios (both bank specific and market specific).

[3] Howells, Peter and Bain, Keith. (1999), “The Economics of Money”, Banking and Finance, a European Text. Pearson Education Limited;

[4] Ivanov V (2000), “Technology of strategic liquidity management in commercial banks”, Financial Bulletin

[5] Viral V. Acharya , “Crisis Resolution and Bank Liquidity”, The Review of Financial Studies;

[6] Zhu Haibin (2001). Bank Runs, Welfare and Policy Implications. Bank for International Settlement Working Paper no 107, Basel;

[7]  The Resolution of the Agency of financial Supervision # 358, dd. 30 September 2005;

[8] Bank for International Settlement (2008), Principles for Sound Liquidity Risk Management and Supervision. Basel Committee on Banking Supervision, BIS Paper, Basel.

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