DETERMINANTS OF COMMERCIAL BANKS' LIQUIDITY IN HUNGARY

Abstract

This paper aims to identify determinants of liquidity of Slovak commercial banks. We consider bank specific and macroeconomic data over the period from 2001 to 2010 and analyze them with panel data regression analysis. We have found that bank liquidity drops mainly as a result of the financial crisis. Bank liquid assets decreases also with higher bank profitability, higher capital adequacy and with the size of bank. Liquidity measured by lending activity of banks increases with the growth of gross domestic product and bank profitability and decreases with higher unemployment. Key interest rates, interest margin, rate of inflation and the level of non-performing loans have no statistically significant effect on the liquidity of Slovak commercial banks.