Funding Liquidity and Risk-Taking Behavior of Banks in India

IF 1.2 Q3 BUSINESS, FINANCE

Journal of Emerging Market Finance Pub Date : 2024-09-01 DOI:10.1177/09726527241257351

Silu Muduli, Shridhar Kumar Dash

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Abstract

This study, utilizing bank-level data for India, investigates the relationship between funding liquidity and banks’ risk-taking behavior. The study uses two risk measures: risk-weighted assets (encompassing credit, market, and operational risk) and liquidity creation (encompassing intermediacy risk). Findings reveal that banks with higher funding liquidity exhibit higher risk-taking behavior. This risk-taking behavior is more pronounced during economic recuperation and expansionary monetary policy phases. Notably, during economic recuperation, banks display heightened intermediacy risk, contrasting with the absence of such evidence during expansionary monetary policy phases. Larger banks with higher deposit shares demonstrate lower risk-taking behavior. Additionally, banks with a return on equity (ROE) below the average ROE exhibit a proclivity for increased risk-taking. This study advocates for liquidity regulation as a crucial complement to bank capital regulation, offering empirical support for moderate risk-taking among highly liquid banks and fortify their balance sheets for a stable banking system in India.JEL Codes: E32, E52, G21, G28

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印度银行的资金流动性和风险承担行为

本研究利用印度银行层面的数据，调查了资金流动性与银行风险承担行为之间的关系。研究采用了两种风险衡量标准：风险加权资产（包括信贷、市场和操作风险）和流动性创造（包括中介风险）。研究结果显示，资金流动性较高的银行表现出较高的风险承担行为。这种风险承担行为在经济复苏和扩张性货币政策阶段更为明显。值得注意的是，在经济复苏阶段，银行表现出更高的中介风险，而在扩张性货币政策阶段则没有这种迹象。存款份额较高的大型银行表现出较低的风险承担行为。此外，股本回报率（ROE）低于平均 ROE 的银行倾向于增加风险承担。本研究主张将流动性监管作为银行资本监管的重要补充，为高流动性银行适度承担风险提供经验支持，并为印度稳定的银行体系强化其资产负债表：E32, E52, G21, G28

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来源期刊

Journal of Emerging Market Finance BUSINESS, FINANCE-

CiteScore

1.80

自引率

33.30%

发文量

期刊介绍： The Journal of Emerging Market Finance is a forum for debate and discussion on the theory and practice of finance in emerging markets. While the emphasis is on articles that are of practical significance, the journal also covers theoretical and conceptual aspects relating to emerging financial markets. Peer-reviewed, the journal is equally useful to practitioners and to banking and investment companies as to scholars.