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Assessing Liquidity Buffers in the Panamanian Banking Sector
Author: Andras Komaromi, Metodij Hadzi-Vaskov, and Torsten Wezel
Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 200
Language:
English
Publication Date:
14 Oct 2016
DOI:
https://doi.org/10.5089/9781475544824.001
ISBN:
9781475544824
ISSN:
1018-5941
Pages:
22
Keywords:
WP; bank; funding; banking sector; liquid asset; Bank liquidity; LCR; Liquidity stress tests; a number of bank; LCR calculation; liquidity shortfall; bank funding; liquidity gap; parent bank; Panamanian bank; stress scenario; illiquid bank; liquidity regulation; funding outflow; LCR standard; Liquidity requirements; Liquidity; Commercial banks; Liquidity stress testing; Securities; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper assesses the resilience of Panamanian banks to (i) a very severe short-term, and (ii) a significant long-lasting liquidity shock scenario. Short-term liquidity buffers are evaluated by approximating the Liquidity Coverage Ratio (LCR) defined in the Basel III accord. The risk of losing a substantial part of foreign funding is analyzed through a conventional liquidity stress test scrutinizing several layers of liquidity across maturity buckets. The results of this study point to some vulnerabilities. First, our approximations indicate that about half of Panamanian banks would need to adjust their liquid asset portfolios to meet current LCR standards. Second, while most banks would be able to meet funding outflows in the stress-test scenario, a number of banks would have to use up all of their liquidity buffers, and a few even face a final shortfall. Nonetheless, most banks displaying sizable liquidity shortfalls have robust solvency positions.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund