THE DETERMINANTS OF LIQUIDITY RISK: A PANEL STUDY OF ISLAMIC BANKS IN MALAYSIA

  • Siti Fatimah Yaacob Universiti Kebangsaan Malaysia
  • Aisyah Abdul Rahman Universiti Kebangsaan Malaysia
  • Zulkefly Abdul Karim Universiti Kebangsaan Malaysia
Keywords: Liquidity risk, NSFR, LCR, Basel 111

Abstract

Liquidity risk occurs when a bank is unable to cover its financial obligation when it is due without bearing any costs. For Islamic bank, there will be additional risk due to limited access to Shariah compliant fund at a reasonable time and cost. Due on the importance on managing liquidity risk, the Basel Committee on Banking Supervision (BCBS) introduced the Basel 111 to emphasize the use of liquidity coverage ratio (LCR) and Net Stable Funding Ratio (NSFR) as measurement of liquidity risk. . This study attempts to examine the determinants of liquidity risk measured with the LCR and NSFR and two groups of variables which is microeconomic (size, capital adequacy ratio, profitability, asset quality and bank specialization) and macroeconomics (GDP and inflation rate). The sample included 17 Islamic Banks in Malaysia and based on secondary data covers a period from 2000 until 2013. Our findings show that characteristic of banks which are CAR and financing are significance with liquidity risk. Other that, both macroeconomic variable, GDP and inflation are also significance with both liquidity measurement proposed by Basel 111.

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Published
2016-09-21
How to Cite
Fatimah Yaacob, S., Abdul Rahman, A., & Abdul Karim, Z. (2016). THE DETERMINANTS OF LIQUIDITY RISK: A PANEL STUDY OF ISLAMIC BANKS IN MALAYSIA. Journal of Contemporary Issues and Thought, 6, 73-82. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/1073