Liquidity Risk of Banks in Light of a Dominant Share of Foreign Capital in the Polish Banking Sector
Authors: Karolina Patora
This article investigates liquidity risk management by banks, which has gained significant importance since the global financial crisis of 2008. The issue is of particular interest for countries like Poland, in which foreign capital plays a dominant role. Such an ownership structure poses certain risks to the local banking sector, which faces an increased probability of the withdrawal of funding or assets’ transfers abroad in case of a crisis. Both these factors can have a detrimental influence on the liquidity position of foreign-owned banks and hence negatively affect the financial stability of the whole banking sector. The aim of this study is to evaluate the impact of a dominating share of foreign investors in the Polish banking sector on the liquidity position of commercial banks. The study hypothesizes that the ownership structure of the Polish banking sector, in which there are banks predominantly controlled by foreign investors, does not pose a threat to the liquidity position of Polish banks. A supplementary research hypothesis is that the liquidity risk profile of foreign-owned banks differs from that of domestic banks. The sample consists of 14 foreign-owned banks and 5 domestic banks owned by local investors, which together constitute approximately 87% of the banking sector’s assets. The data covers the period of 2004–2014. The results of the regression models show no evidence of significant differences in terms of the dynamics of changes of the liquidity buffers between the foreign-owned and domestic banks, although the signs of the coefficients might suggest that the foreign-owned banks were decreasing the holdings of liquid assets at a slower pace over the examined period, compared to the domestic banks. However, no proof of the statistical significance of these findings has been found. The supplementary research hypothesis that the liquidity risk profile of foreign-controlled banks differs from that of domestic banks was rejected.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1126139Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 669
 A. Kotowicz, Raport o sytuacji banków w 2015 r., Urząd Komisji Nadzoru Finansowego, Warszawa 2016.
 http://www.nbp.pl/en/statystyka/czasowe_dwn/nalez_zobow_banki_en.zip, accessed on 25.07.2016.
 O. Havrylchyk, The effect of foreign bank presence on firm entry and exit in transition economies, „Journal of Banking & Finance”, 36, 2012, pp. 1710-1721.
 H. Degryse, O. Havrylchyk, E. Jurzyk, S. Kozak, Foreign bank entry, credit allocation and lending rates in emerging markets: Empirical evidence from Poland, „Journal of Banking & Finance”, 36, 2012, pp. 2949-2959.
 J. Wu, A. C. Luca, B. N. Jeon, Foreign bank penetration and the lending channel in emerging economies: Evidence from bank-level panel data, „Journal of International Money and Finance”, 30, 2011, pp. 1128-1156.
 O. Müller, A. Uhde, Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets, „Journal of International Financial Markets, Institutions & Money”, 23, 2013, pp. 136-162.
 W. Althammer, W. Haselmann, Explaining foreign bank entrance in emerging markets, „Journal of Comperative Economics”, 39, 2011, pp. 486-498.
 S-H Chen, C-C Liao, Are foreign banks more profitable than domestic banks? Home- and host-country effects of banking market structure, governance, and supervision, „Journal of Banking & Finance”, 35, 2011, pp. 819-839.
 Y. Xu, Towards a more accurate measure of foreign banking entry and its impact on domestic banking performance: The case of China, „Journal of Banking & Finance”, 35, 2011, pp. 886-901.
 R. Lensik, N. Hermes, The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?, „Journal of Banking & Finance”, 28, 2004, pp. 553-568.
 M. C. V. Manlagñit, The economic effects of foreign banks presence: Evidence from the Philippines, „Journal of International Money and Finance”, 30, 2011, pp. 1180-1194.
 N. van Horen, Foreign banking in developing countries; origin matters, „Emerging Markets Review”, 8, 2007, pp. 81-105.
 S. Claessens, N. van Horen, Being a foreigner among domestic banks: Asset or Liability?, „Journal of Banking & Finance”, 36, 2012, pp. 1276-1290.
 T. Poghosyan, Re-examining the impact of foreign bank participation on interest margins in emerging markets, „Emerging Markets Review”, 11, 2010, pp. 390-403.
 E. Detragiache, P. Gupta, Foreign banks in emerging market crises: Evidence from Malaysia, „Journal of Financial Stability”, 2, 2007, pp. 217-242.
 B. N. Jeon, M. P. Olivero, J. Wu, Multinational banking and the international transmission of financial shocks: Evidence from foreign bank subsidiaries, „Journal of Banking & Finance”, 37, 2013, pp. 952-972.
 V. Dinger, Do foreign-owned banks affect banking system liquidity risk?, „Journal of Comparative Economics”, 37, 2009, pp. 647-657.
 N. Konovalova, M. Kudlinska,M. Rozgina,E. Zelgagve, Problems of imbalanced liquidity in Latvian commercial banks and possible solutions, „Journal of Business Management”, Issue 1, 2008, pp. 102-118.
 O. Aspachs, E. Nier, M. Tiesset, Liquidity, banking regulatuion and the macroeconomy. Evidence on bank liquidity holdings from a panel of UK-resident banks, unpublished manuscript, BIS, 2005, source: www.bis.org/bcbs/events/rtf05AspachsNierTiesset.pdf, (accessed: 01.07.2016).
 C. Deléchat, C. Henao, P. Muthoora, S. Vtyurina, The Determinants of Banks' Liquidity Buffers in Central America, Working Paper, International Monetary Fund, December 2012.
 M. Pawłowska, D. Serwa, S. Zajączkowski, International transmission of liquidity shocks between parent banks and their affiliates: the host country perspective, „NBP Working Paper” No. 172, Warszawa 2014.
 D. Kwiatkowski, P. C. B. Phillips, P. Schmidt and Y. Shin, Testing the null hypothesis of stationarity against the alternative of a unit root, „Journal of Econometrics” 54, 1992, pp. 159-178.
 Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions, Official journal of the European Union, L11, 17 January 2015.
 G. C. Chow, Tests of equality between sets of coefficients in two linear regressions, „Econometrica”, Vol. 28, 3 (July 1960).