Liquidity risk

Liquidity risk is a term often used for risk relating to differences in maturities between banks’ assets and liabilities. Banks have typically used their customers’ sight deposits to fund longer-term loans. Norges Bank monitors bank liquidity bank funding markets. For example, Norges Bank needs to be able to assess whether in a given situation, banks face liquidity or solvency problems and what consequences such problems in one bank may have for financial stability.

Liquidity monitoring is based on market surveillance, meetings and the banks’ reporting requirements. Moreover, the largest banks submit separate liquidity reports. A liquidity analysis, which is not published, is compiled on the basis of these reports. Surveillance data are used in the publication, Financial Stability report.

Liquidity monitoring is also useful for the Bank in exercising its authority to provide liquidity loans, make deposits and furnish other credit to commercial banks and savings banks. In addition, Norges Bank may issue credit on special terms. This central bank function is known as lender of last resort.


 

Published 19 October 2010 10:06
Edited 19 August 2013 13:22