Basel III long-term liquidity standard in the context of the profitability of banks and volatility of their stock prices – quantitative analysis for the euro area

Marcin Flotyński

Abstract

The paper is devoted to the Net Stable Funding Ratio (NSFR) - the liquidity regulation included in the Basel III recommendations. The aim of the article is to verify the impact of stable funding structure measured by estimated NSFR on the profitability of banks and the volatility of their stock prices. It embraces the data of the 100 biggest banks in the euro area which are listed on stock exchanges. The research area of this article is divided into two parts. The first one is devoted to the relation between the NSFR and bank profitability. In the second one, the relation between the NSFR and a bank’s valuation (stock prices) and the volatility of stock prices on the capital market is presented. Models with financial and macroeconomic variables were used. The research results showed that there is a positive and statistically significant relation between the level of the NSFR in banks and their profitability measured by the return on average assets (ROAA), the return on average equity (ROAE) and the net interest margin (NIM). Furthermore, a growing NSFR has a positive influence on changes of stock prices and a negative influence on the level of their volatility.
Author Marcin Flotyński (WE / KTPiPP)
Marcin Flotyński,,
- Department of Money Theory and Monetary Policy
Journal seriesWorking Papers - National Bank of Poland, ISSN 2084-624X, (0 pkt)
Issue year2017
No274
Pages1-99
Publication size in sheets4.9
Keywords in Englishbanking sector, regulation, funding structure, liquidity, Basel III, Net Stable Funding Ratio (NSFR), volatility of stock prices
URL http://www.nbp.pl/publikacje/materialy_i_studia/274_en.pdf
Languageen angielski
Score (nominal)5
ScoreMinisterial score = 5.0, 17-10-2019, ArticleFromJournal
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