Assignment topic:
Liquidity risk, Basel III liquidity requirements, and Australian banks' liquidity position.
Report
1. Define liquidity risk and distinguish between asset liquidity and liability liquidity management. What are the main features of an effective liquidity management strategy for a typical commercial bank?
2. Use actual bank data to calculate liquidity ratios and construct comparison graphs for the four major Australian banks over the years 2010-2015. Conduct both peer and trend analysis based on these figures. (10 marks) Note: Various ratios can be used to measure different aspects of bank liquidity. Your analysis should focus on one ratio (for all four banks) and provide meaningful interpretation.
3. As part of Basel III liquidity requirements, the Liquidity Coverage Ratio framework was implemented in Australia in January 2015, while the Net Stable Funding Ratio will be introduced in 2018. Provide an overview of these two requirements and discuss how they may help promote more comprehensive bank liquidity management.
Question 2 data and graph
|
Liquidity Ratio
|
|
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
|
Commonwealth Bank of Australia
|
0.89
|
1.16
|
1.06
|
1.08
|
1.09
|
1.08
|
|
National Australia Bank Limited
|
1.06
|
1.18
|
1.10
|
1.06
|
1.03
|
0.97
|
|
Australia and New Zealand Banking Group Limited
|
0.89
|
1.02
|
1.07
|
1.08
|
1.08
|
1.14
|
|
Westpac Banking Corporation
|
1.13
|
1.24
|
1.13
|
1.08
|
1.03
|
0.93
|
Suggested data sources for part 2: Banks' annual reports 2010-2015, Bankscope (access via Monash library website)
Suggested reference sources for part 3: RBA and APRA discussion papers on the implementation of Basel III liquidity framework in Australia Instructions to students You are required to retain a copy of the assignment until results are finalised.
Faculty Style Guide Work submitted for this assessment must follow the REPORT style as outlined in the Faculty Q Manual.