DETERMINANTS OF MATURITY TRANSFORMATION RISK (NSFR)
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Date
2019
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UMT.Lahore
Abstract
Maturity transformation risk has been considered as major threat for financial sector particularly banking industry since the global crisis of 2007-2008. To overcome this risk that emerges from transformation characteristic of banks Basel III made them subject to new liquidity regulations. The initial version of these regulations was Liquidity Coverage Ratio, that ensure short term resilience, later on another measure was introduced called as net stable funding ratio (NSFR), the purpose of this is to make the banks stable enough that they can experience withstand liquidity tremors through medium as well as long-term resilience. It is the responsibility of central bank of a country to get the Basel regulations implemented on the banks it supervises. We used data of 23 banks, out of which 19 are conventional banks and 4 are fully Islamic banks from the year 2010 to 2018. Effect of some bank specific and macroeconomic factors on maturity transformation risk of these banks have been analyzed in this study. We have used 2 step system GMM technique on our data set and found out that bank diversification, bank specialization, bank efficiency and return on assets as significant bank specific factors while GDP% has been found as macroeconomic significant factor. While credit risk have been found insignificant to maturity transformation risk.