The Impact of Prudential Regulation on Jordanian Banks Liquidity

Jamileh Ali Mustafa

doi:doi:10.11648/j.ijber.20200905.17

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The Impact of Prudential Regulation on Jordanian Banks Liquidity

Jamileh Ali Mustafa

Published in International Journal of Business and Economics Research (Volume 9, Issue 5)

Received: 5 September 2020 Accepted: 19 September 2020 Published: 12 October 2020

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Abstract

Regulation of the financial sector is major aspect of consideration by the regulating authority, since financial sector highly influences the performance of the entire economy. The Global Financial Crises underlined the importance of liquidity management,when the credit crisis led to a liquidity crisis. Thus, Jordanian regulatory authorities are trying to achieve and maintain the financial stability by assessment of the banks’ financial condition and through regulations that ensure the stability and prevent failures that can occur under adverse circumstances. The study aim to analyze the impact of a prudential regulation on the Jordanian Banks liquidity. The specific objective in this case is; to determine whether the current prudential regulation enhance the banks liquidity in Jordan, or financial regulation still need additional updates. This study examines the impact of both Microprudential and Macroprudential regulation on Banks Liquidity Ratio, within the context of the Jordanian Banking Sector. To carry out the analysis, managed to collect the annual data for 12 listed during the period 2005-2018 with data arranged in the form of a panel, by using Random Effect Approach Regression, and compared the bank liquidity ratios during period before and after Global Financial Crisis (2008).The results indicate that Macroprudential tools have positive significant impact on Banks Liquidity Ratio, while micro is not. The main conclusions from this research indicate that while liquidity requirements tend to reduce liquidity risk, it appear to be more costly to comply with, reduced bank liquidity, and the banking sector still need additional Regulation updates to enhance banks Liquidity.

Published in	International Journal of Business and Economics Research (Volume 9, Issue 5)
DOI	10.11648/j.ijber.20200905.17
Page(s)	342-347
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Prudential Regulation Tools, Banks Liquidity, Basel III Accord

References

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[2]	Rochet, J.-C. 2004. “Macroeconomic Shocks and Banking Supervision.” Journal of Financial Stability 1 (1): 93–110.
[3]	Asian Development Bank., 2013. The Road to ASEAN financial Integration. ISBN 978-92-9092-706-8.
[4]	Edison, H. J. & Pauls, B., 1993. A Re-assessment of the relationship Between Real Exchage Rates and Real Interest Rates: 1974-1990. Journal of Monetary Economics, Volume 31, pp. 165-187.
[5]	Laeven, L. & Valencia, F., 2012. Systematic Banking Crisis: An Update, Washington DC; USA: International Monetary Fund; IMF Working Paper WP/12/163.
[6]	Ferreira A. L. and Leon Manilla: Philippines Dickey, D. a. W., 1979. Distribution of the estimates for autoregressive time series with a unit root. Journal of the American Statisitcal Association, 74 (366), pp. 427-431.
[7]	Bernanke, B. S., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives, 9 (4), 27-48.
[8]	Obstfeld, M. & Taylor, A. M., 2002. Globalization and Capital Markets, National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138: National Bureau of Economic Research (NBER) Working Paper No 8846.
[9]	Kara, G. I. and S. M. Ozsoy. 2016. “Bank Regulation Under Fire Sale Externalities.” Finance and Economics Discussion Series 2016-026. Washington: Board of Governors of the Federal Reserve System.
[10]	Aiyar, S., Calomiris, C. W. & Wieladek, T. (2014), 'Does macroprudential regulation leak? Evidence from a uk policy experiment', Journal of Money, Credit and Banking 46 (s1), 181_214.
[11]	Bank for International Settlements (1986), Recent innovations in international banking, report prepared by a study group established by the central banks of the G10 countries, Basel, April (Cross Report).
[12]	Angelini, P., Neri, S. & Panetta, F. (2011),, Economic Research and International Relations Area, Monetary and macroprudential policies, Temi di discussion (Economic working papers) 801.
[13]	Bank for International Settlements (2001), ‘Cycles and the financial system’, 71st Annual Report, Chapter VII, June, pp. 123-141 [4] Bank for International Settlements (2002), ‘The interaction between the financial and real economy’, 72nd Annual Report, Chapter VII, June, pp. 122-140.
[14]	Bruno, V., Shim, I. & Shin, H. S. (2015), Comparative assessment of macroprudential policies, Technical report, Bank for International Settlements.
[15]	Fleming, M., 2012, “Federal Reserve Liquidity Provision during the Financial Crisis of 2007-2009,”Annual Review of Financial Economics, 4, 161–177.
[16]	BCBS (2014). Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools, Technical report.
[17]	Gorton, G., and G. Pennacchi, 1990, “Financial Intermediaries and Liquidity Creation,” Journal of Finance, 45 (1), 49–71.
[18]	He, Z., I. G. Khang, and A. Krishnamurthy, 2010, “Balance Sheet Adjustment in the 2008 Crisis,” IMF Economic Review, 1, 118–156.
[19]	Miller, S. and R. Sowerbutts. 2018. “Bank Liquidity and the Cost of Debt.” Bank of England Staff Working Paper No. 707.
[20]	Walther, A. 2016. “Jointly Optimal Regulation of Bank Capital and Liquidity.” Journal of Money, Credit and Banking 48 (2–3): 415–448.

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APA Style

Jamileh Ali Mustafa. (2020). The Impact of Prudential Regulation on Jordanian Banks Liquidity. International Journal of Business and Economics Research, 9(5), 342-347. https://doi.org/10.11648/j.ijber.20200905.17

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Jamileh Ali Mustafa. The Impact of Prudential Regulation on Jordanian Banks Liquidity. Int. J. Bus. Econ. Res. 2020, 9(5), 342-347. doi: 10.11648/j.ijber.20200905.17

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Jamileh Ali Mustafa. The Impact of Prudential Regulation on Jordanian Banks Liquidity. Int J Bus Econ Res. 2020;9(5):342-347. doi: 10.11648/j.ijber.20200905.17

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@article{10.11648/j.ijber.20200905.17,
  author = {Jamileh Ali Mustafa},
  title = {The Impact of Prudential Regulation on Jordanian Banks Liquidity},
  journal = {International Journal of Business and Economics Research},
  volume = {9},
  number = {5},
  pages = {342-347},
  doi = {10.11648/j.ijber.20200905.17},
  url = {https://doi.org/10.11648/j.ijber.20200905.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20200905.17},
  abstract = {Regulation of the financial sector is major aspect of consideration by the regulating authority, since financial sector highly influences the performance of the entire economy. The Global Financial Crises underlined the importance of liquidity management,when the credit crisis led to a liquidity crisis. Thus, Jordanian regulatory authorities are trying to achieve and maintain the financial stability by assessment of the banks’ financial condition and through regulations that ensure the stability and prevent failures that can occur under adverse circumstances. The study aim to analyze the impact of a prudential regulation on the Jordanian Banks liquidity. The specific objective in this case is; to determine whether the current prudential regulation enhance the banks liquidity in Jordan, or financial regulation still need additional updates. This study examines the impact of both Microprudential and Macroprudential regulation on Banks Liquidity Ratio, within the context of the Jordanian Banking Sector. To carry out the analysis, managed to collect the annual data for 12 listed during the period 2005-2018 with data arranged in the form of a panel, by using Random Effect Approach Regression, and compared the bank liquidity ratios during period before and after Global Financial Crisis (2008).The results indicate that Macroprudential tools have positive significant impact on Banks Liquidity Ratio, while micro is not. The main conclusions from this research indicate that while liquidity requirements tend to reduce liquidity risk, it appear to be more costly to comply with, reduced bank liquidity, and the banking sector still need additional Regulation updates to enhance banks Liquidity.},
 year = {2020}
}

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TY  - JOUR
T1  - The Impact of Prudential Regulation on Jordanian Banks Liquidity
AU  - Jamileh Ali Mustafa
Y1  - 2020/10/12
PY  - 2020
N1  - https://doi.org/10.11648/j.ijber.20200905.17
DO  - 10.11648/j.ijber.20200905.17
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 342
EP  - 347
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20200905.17
AB  - Regulation of the financial sector is major aspect of consideration by the regulating authority, since financial sector highly influences the performance of the entire economy. The Global Financial Crises underlined the importance of liquidity management,when the credit crisis led to a liquidity crisis. Thus, Jordanian regulatory authorities are trying to achieve and maintain the financial stability by assessment of the banks’ financial condition and through regulations that ensure the stability and prevent failures that can occur under adverse circumstances. The study aim to analyze the impact of a prudential regulation on the Jordanian Banks liquidity. The specific objective in this case is; to determine whether the current prudential regulation enhance the banks liquidity in Jordan, or financial regulation still need additional updates. This study examines the impact of both Microprudential and Macroprudential regulation on Banks Liquidity Ratio, within the context of the Jordanian Banking Sector. To carry out the analysis, managed to collect the annual data for 12 listed during the period 2005-2018 with data arranged in the form of a panel, by using Random Effect Approach Regression, and compared the bank liquidity ratios during period before and after Global Financial Crisis (2008).The results indicate that Macroprudential tools have positive significant impact on Banks Liquidity Ratio, while micro is not. The main conclusions from this research indicate that while liquidity requirements tend to reduce liquidity risk, it appear to be more costly to comply with, reduced bank liquidity, and the banking sector still need additional Regulation updates to enhance banks Liquidity.
VL  - 9
IS  - 5
ER  -

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Author Information

Jamileh Ali Mustafa

Economic Department, Faculty of Business, The University of Jordan, Amman, Jordan

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APA Style

Jamileh Ali Mustafa. (2020). The Impact of Prudential Regulation on Jordanian Banks Liquidity. International Journal of Business and Economics Research, 9(5), 342-347. https://doi.org/10.11648/j.ijber.20200905.17

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ACS Style

Jamileh Ali Mustafa. The Impact of Prudential Regulation on Jordanian Banks Liquidity. Int. J. Bus. Econ. Res. 2020, 9(5), 342-347. doi: 10.11648/j.ijber.20200905.17

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AMA Style

Jamileh Ali Mustafa. The Impact of Prudential Regulation on Jordanian Banks Liquidity. Int J Bus Econ Res. 2020;9(5):342-347. doi: 10.11648/j.ijber.20200905.17

Copy | Download

@article{10.11648/j.ijber.20200905.17,
  author = {Jamileh Ali Mustafa},
  title = {The Impact of Prudential Regulation on Jordanian Banks Liquidity},
  journal = {International Journal of Business and Economics Research},
  volume = {9},
  number = {5},
  pages = {342-347},
  doi = {10.11648/j.ijber.20200905.17},
  url = {https://doi.org/10.11648/j.ijber.20200905.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20200905.17},
  abstract = {Regulation of the financial sector is major aspect of consideration by the regulating authority, since financial sector highly influences the performance of the entire economy. The Global Financial Crises underlined the importance of liquidity management,when the credit crisis led to a liquidity crisis. Thus, Jordanian regulatory authorities are trying to achieve and maintain the financial stability by assessment of the banks’ financial condition and through regulations that ensure the stability and prevent failures that can occur under adverse circumstances. The study aim to analyze the impact of a prudential regulation on the Jordanian Banks liquidity. The specific objective in this case is; to determine whether the current prudential regulation enhance the banks liquidity in Jordan, or financial regulation still need additional updates. This study examines the impact of both Microprudential and Macroprudential regulation on Banks Liquidity Ratio, within the context of the Jordanian Banking Sector. To carry out the analysis, managed to collect the annual data for 12 listed during the period 2005-2018 with data arranged in the form of a panel, by using Random Effect Approach Regression, and compared the bank liquidity ratios during period before and after Global Financial Crisis (2008).The results indicate that Macroprudential tools have positive significant impact on Banks Liquidity Ratio, while micro is not. The main conclusions from this research indicate that while liquidity requirements tend to reduce liquidity risk, it appear to be more costly to comply with, reduced bank liquidity, and the banking sector still need additional Regulation updates to enhance banks Liquidity.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - The Impact of Prudential Regulation on Jordanian Banks Liquidity
AU  - Jamileh Ali Mustafa
Y1  - 2020/10/12
PY  - 2020
N1  - https://doi.org/10.11648/j.ijber.20200905.17
DO  - 10.11648/j.ijber.20200905.17
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 342
EP  - 347
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20200905.17
AB  - Regulation of the financial sector is major aspect of consideration by the regulating authority, since financial sector highly influences the performance of the entire economy. The Global Financial Crises underlined the importance of liquidity management,when the credit crisis led to a liquidity crisis. Thus, Jordanian regulatory authorities are trying to achieve and maintain the financial stability by assessment of the banks’ financial condition and through regulations that ensure the stability and prevent failures that can occur under adverse circumstances. The study aim to analyze the impact of a prudential regulation on the Jordanian Banks liquidity. The specific objective in this case is; to determine whether the current prudential regulation enhance the banks liquidity in Jordan, or financial regulation still need additional updates. This study examines the impact of both Microprudential and Macroprudential regulation on Banks Liquidity Ratio, within the context of the Jordanian Banking Sector. To carry out the analysis, managed to collect the annual data for 12 listed during the period 2005-2018 with data arranged in the form of a panel, by using Random Effect Approach Regression, and compared the bank liquidity ratios during period before and after Global Financial Crisis (2008).The results indicate that Macroprudential tools have positive significant impact on Banks Liquidity Ratio, while micro is not. The main conclusions from this research indicate that while liquidity requirements tend to reduce liquidity risk, it appear to be more costly to comply with, reduced bank liquidity, and the banking sector still need additional Regulation updates to enhance banks Liquidity.
VL  - 9
IS  - 5
ER  -

Copy | Download