The Determinants of Banks' Liquidity Buffers in Central America
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
Banks’ liquidity holdings are comfortably above legal or prudential requirements in most Central American countries. While good for financial stability, high systemic liquidity may nonetheless hinder monetary policy transmission and financial markets development. Using a panel of about 100 commercial banks from the region, we find that the demand for precautionary liquidity buffers is associated with measures of bank size, profitability, capitalization, and financial development. Deposit dollarization is also associated with higher liquidity, reinforcing the monetary policy and market development challenges in highly dollarized economies. Improvements in supervision and measures to promote dedollarization, including developing local currency capital markets, would help enhance financial systems’ efficiency and promote intermediation in the region.
Series:
Working Paper No. 2012/301
Subject:
Asset and liability management Banking Credit Financial institutions Financial regulation and supervision Financial safety nets Foreign banks Liquidity Liquidity management Liquidity requirements Money
English
Publication Date:
December 21, 2012
ISBN/ISSN:
9781616356675/1018-5941
Stock No:
WPIEA2012301
Pages:
43
Please address any questions about this title to publications@imf.org