Bank Liquidity and its Determinants in Romania

Recently, the global crisis has proven that the lack of bank liquidity was the main trigger of all the negative events. Many profitable banks faced difficulties in managing their own funds due to the misunderstanding of liquidity risk. I conducted this research paper with the aim of identifying the factors that influence bank liquidity through a multiple regression model, over a panel of commercial banks in Romania. The results reflect both common and different determinants for the two liquidity rates analyzed and are consistent with the previous literature on this topic. The pre-crisis years are observed separately from the crisis period (2008- 2010). An important indicator for bank stability, Z-score, has a significant influence over bank liquidity in the crisis years. In the pursuit of designing efficient liquidity management tools, I built the conceptual and empirical framework for enhancing bank liquidity, as a variable difficult to stress test.