Assessing Liquidity Buffers in the Panamanian Banking Sector

IMF Working Papers, October 14, 2016

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Assessing Liquidity Buffers in the Panamanian Banking Sector

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Bibliographic details

• Authors: Andras Komaromi, Metodij Hadzi-Vaskov, Torsten Wezel
• Published: October 14, 2016
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475544824.001

Objective and Scenarios

• Assess resilience of Panamanian banks to:
  • (i) a very severe short-term liquidity shock scenario.
  • (ii) a significant long-lasting liquidity shock scenario.
• Short-term liquidity buffers evaluated by approximating the Liquidity Coverage Ratio (LCR) defined in the Basel III accord.
• Risk of losing a substantial part of foreign funding analyzed through a conventional liquidity stress test scrutinizing several layers of liquidity across maturity buckets.

Methods and Metrics

• Approximation of the Liquidity Coverage Ratio (LCR) as per the Basel III accord.
• Conventional liquidity stress test examining multiple layers of liquidity across maturity buckets.

Key Findings

• About half of Panamanian banks would need to adjust their liquid asset portfolios to meet current LCR standards.
• While most banks would be able to meet funding outflows in the stress-test scenario:
  • A number of banks would have to use up all of their liquidity buffers.
  • A few banks even face a final shortfall.
• Nonetheless, most banks displaying sizable liquidity shortfalls have robust solvency positions.

Subject Areas and Keywords

• Subjects: Asset and liability management; Banking; Commercial banks; Financial institutions; Financial regulation and supervision; Financial sector policy and analysis; Liquidity; Liquidity requirements; Liquidity stress testing; Securities.
• Keywords: a number of bank; bank; bank funding; Bank liquidity; banking sector; Commercial banks; funding; funding outflow; Global; illiquid bank; LCR; LCR calculation; LCR standard; liquid asset; Liquidity; liquidity gap; liquidity regulation; Liquidity requirements; liquidity shortfall; Liquidity stress testing; Liquidity stress tests; Panamanian bank; parent bank; Securities; stress scenario; WP.

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