Prudential Liquidity Regulation in Developing Countries: A Case Study of Rwanda

By Sarah Sanya, A. E. Wayne Mitchell, Angelique Kantengwa

January 1, 2012

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Sarah Sanya, A. E. Wayne Mitchell, and Angelique Kantengwa. Prudential Liquidity Regulation in Developing Countries: A Case Study of Rwanda, (USA: International Monetary Fund, 2012) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyses the prudential liquidity management framework, in particular the quantitative indicators employed by the central bank of Rwanda in response to the domestic liquidity crisis in 2008/09. It emphasises that the quantitative methods used in the monitoring and assessment of systemic liquidity risk are inadequate because they did not signal the liquidity crises ex-post. There are quick gains to be made from augumenting the liquidity risk indicators with more dynamic liquidity stress tests so that compliance will be achieved through lengthening the maturities of both assets and liabilities on the balance sheet as opposed to simply holding more liquid assets. The paper recommends that policy emphasis shift toward reforms that strengthen systemic liquidity risk assesment, monetary policy implementation as well as improve the efficiency of Rwanda's financial system.

Subject: Asset and liability management, Banking, Commercial banks, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Liquidity, Liquidity indicators, Liquidity management, Liquidity risk, Liquidity stress testing

Keywords: Balance sheet maturity gap analysis, Bank, Banking system, Banking system to liquidity shock, Cash flow, Commercial banks, Current liabilities, Excess reserves, Global, Lender-of last-resort facilities, Liquid asset, Liquidity, Liquidity crisis, Liquidity management, Liquidity management framework, Liquidity regulation framework, Liquidity risk, Liquidity risk metrics, Liquidity stress testing, Liquidity stress tests, Market liquidity condition, NBR's balance sheet maturity gap analysis, Regulation, Rwanda, Stress testing, Supervsion, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/020
Stock No:

WPIEA2012020
ISBN:

9781463931827
ISSN:

1018-5941

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