Liquidity Crisis_en
Liquidity Crisis
Impacts on The Financial Institutions
“suggested solutions”
Lecturer: eMad AbuShaaban
Business College
Accounting Department
April 2009
CONTENTS
Definition: Crisis, Liquidity, Liquidity Crisis, Coping Approach
1. Identify crisis impact on the financial institutions.
2. Measure/Quantify crisis impact.
3. Cope Techniques on crisis.
1. Identify crisis impact on the financial institutions.
- Impact on cash flow and liquidity.
- Impact on the balance sheet (assets and liabilities)
- Impact on portfolio quality,
- Impact on profitability Impact on income statements (income and expenses)
2. Measure/Quantify crisis impact.
- This tool should be used when considering:
- The funding strategy for new products
- The maturity of funding
- The maturities and modifications of present products (either loan or deposit products),
- The maturities of new products (either loan or deposit products),
- not to increase liquidity risk.
3. Cope Techniques on crisis.
External Tools
1. Insurance against defaulting.
- On loan portfolio as whole
- On individual loan
2. Loan Guarantees
- By PMA
- By other Governmental Body
3. Emergency Liquidity Fund
- Voluntary ELF
- Mandatory ELF
Internal Tools
- Designing Internal Policies and Procedures Modifications
- Designing Product Modifications
- Designing New Products
Bankruptcy Predicting Model
- Z-score
- Who Developed Z-score
- Uses of Z-score
- Z-score Components
End