- Title
- Evergreen, bank funding & liquidity management
- Creator
- Gooley, Nathan John
- Relation
- University of Newcastle Research Higher Degree Thesis
- Resource Type
- thesis
- Date
- 2016
- Description
- Research Doctorate - Doctorate of Business Administration (DBA)
- Description
- Government mandated institutions in Australia and Canada have continuously progressed banking regulation throughout time by making gradual alterations to prudential frameworks and supervisory practices. This has included the prompt domestic adaptation of the three Basel accords. A main objective is to ensure banking organisations become more resilient to stresses that impact their capital and liquidity adequacy. Banking organisations are faced with the task of transforming their balance sheets and funding profiles to not only strengthen their balance sheets but to curb heighted liquidity costs that have been brought on by regulatory reform. A review of existing literature on the components of bank funding, liquidity and procyclicality recognises their significance in ensuring individual bank stability and the prevarication of broader systemic implications in the wider economy. This dissertation has examined the historical evolution of the regulatory environments in both Australia and Canada and compared the components of bank balance sheets that offer insights into their funding preference and liquidity holdings, and provide early indicators for procyclicality within the banking sector. It has also had the goal of developing existing research and knowledge of liquidity stresses within bank balance sheets. This research has endeavoured to further balance sheet innovation, through action research that has been carried out over a five year period, to provide banking organisations with options to alter their balance sheets in order to meet the Basel III package of reforms and better deal with liquidity pressures, such as those that were evident in many countries throughout the most recent financial crisis. A new methodology for balance sheet transformation under Basel III, “evergreen” is articulated, with a suite of evergreen asset and liability products and balance sheet exposures being assessed for impact and acceptance within the banking industry. Verification of the evergreen method is demonstrated by the banking industry including it within their strategy for future balance sheet innovation; banks designing and constructing evergreen capability; the regulator encompassing it within prudential standards; and widespread acceptance of evergreen by investors and other financial market participants. Whilst components of evergreen are increasingly becoming a greater part of the banking industry within Australia, it is recognised that the concepts and models of evergreen, are at a primary juncture in their development and require substantial additional focus and research. The usefulness of this dissertation will be established through the particulars of future research settings and must be appraised to the degree that it appears correct, original and apt. Regarding deposits, this dissertation finds that: the existence of voluntary deposit insurance schemes would allow the competitive landscape for retail deposits to become about more than just price; operational deposits are not immune from procyclical competition; Australian banks have a much greater appetite and tolerance for at-call deposit raising; liquidity regulation has permanently shifted the ‘market rate’ for deposit funding above its ‘natural rate’; and foreign currency deposit raising may lead to banks running unhedged positions or developing a larger reliance towards United States Dollars. For wholesale funding, it is observed that: liquidity regulation has increased the reliance of banks on domestic financial markets to fulfil their financing needs; the volume of short-dated prime bank paper being issued in Australia has declined where there are consequences for the Bank Bill Swap Rates; and large differentials in the semi/quarterly spread can substantially impact the profitability of banking book products. The domestic implementation of the Basel III package of reforms on liquidity in both Australia and Canada has, in many ways, imitated the historical approach taken towards bank capital regulation. This dissertation deducts that, as there is for capital, the concept of ‘regulatory’ and ’economic’ liquidity now exists. Furthermore, regulation has introduced a predisposition to government bonds, which may have unintended consequences for both government sponsored issuers and bank investors. Finally, procyclicality must be monitored and managed by the government sponsored institution tasked with the role of implementing monetary policy, rather than institutions that implement and enforce prudential regulation.
- Subject
- evergreen; liquidity; dual banking Theory; bank funding; deposits; wholesale funding; Australia; Canada; Australian banking system; Canadian banking system; liquidity coverage ratio; net stable funding ratio; procyclicality; net cumulative cash flow; historical research; comparative research; action research; intraday liquidity; lender of last resort; insured deposits; core deposits; customer relationships; transactional deposits; bank balance sheet; regulatory evolution; counterbalancing capacity; regulatory liquidity; economic liquidity; weighted average cost of liquidity; liquid asset carrying cost; liquidity duration funding factor; term liquidity premium; runoff factors; single currency basis; bank regulation; 6s3s; 3s1s; BOB; bills/OIS; FRA/OIS; bank margin; net interest margin; high quality liquid assets; notice account; notice deposit; Basel III; callable deposit; daylight liquidity; BOB Spread; BBSW; CDOR; committed liquidity facility; authorised deposit-taking institution; Bank for International Settlements’ (BIS); BCBS; APRA; liquidity stress; OSFI; RBA; BOC; off-balance sheet; uninsured deposits; working capital; behavioural maturity; contractual maturity; notice period; liquidity risk; liquid Assets; notice of withdrawal; banking; interest rates; option; secured funding; free banking theory; institutional theory
- Identifier
- http://hdl.handle.net/1959.13/1310643
- Identifier
- uon:22062
- Rights
- Copyright 2016 Nathan John Gooley
- Language
- eng
- Full Text
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|---|---|---|---|---|---|---|---|
| View Details Download | ATTACHMENT01 | Abstract | 121 KB | Adobe Acrobat PDF | View Details Download | ||
| View Details Download | ATTACHMENT02 | Thesis | 8 MB | Adobe Acrobat PDF | View Details Download |