BANK LIQUIDITY RISK MANAGEMENT IN PAKISTAN: DOES LOAN QUALITY, ASSET QUALITY AND FUNDING MANAGEMENT EFFECT?

Abstract

Purpose: The study encompasses assessment of Liquidity Risk Management (LRM) comparatively among conventional banks (CnBs) and
Islamic banks (IsBs) operating in Pakistan.
Design/Methodology/Approach: The impact of independent variables
Asset Quality (AQAL), Funding Management (FMAN) and Loan Quality
(LQAL) have been observed on LRM through multiple hierarchical regression model and descriptive analysis.
Findings: The results for CnBs show that the LQAL and FMAN has
positive impact on LRM while AQAL has negative impact. Similarly,
for IsBs, the AQAL and FMAN positively affect LRM while LQAL has
negative impact on the same. Further, the average resulting values of
financial rations exhibit the outcome of comparatively better performance
of IsBs than CnBs.
Originality/Significance: This may considered be the first study in terms
of Pakistani Islamic and conventional banks liquidity risk management
analysis with respect to significant variables like LQAL, FMAN and
AQAL presenting a comparative analysis.
Research Limitations/Implications: The paper develops a framework
through important variables LQAL, FMAN and AQAL for assessment of
most sensitive banking risk aspect of Liquidity risk management and its
assessment for massively growing Islamic banks.
Practical and Social Implications: The paper provides in-depth analysis
and insight to banking industry stakeholders, regulators, Government
policy makers, corporate management and visionary research scholars
regarding present situation of management of liquidity risk in IsBs and
CnBs