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2014•Unpublished venueRequires access

Using Loan-to-Deposit Ratio to Avert Liquidity Risk: A Case of 2008 Liquidity Crisis

Muhammad Sajid Saeed

Open publisher page 6 citations

Abstract

Liquidity risk is an on-going issue since the emergence of liquidity crisis of 2008. This paper aims to contribute to the discussion on how Loan-to-Deposit (LTD) ratio can be used to investigate and avert liquidity problem in the banking sector. For this purpose, the data of Major British Banking Groups (MBBG) are collected and critically analysed. The findings of the study reveal that the banks which sustain the LTD ratio were able to successfully pass through the liquidity crisis of 2008, and other banks which rely more on borrowed funds or banks with increasing LTD ratio, became the victim of financial crisis.

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What this paper is about

Liquidity risk is an on-going issue since the emergence of liquidity crisis of 2008. This paper aims to contribute to the discussion on how Loan-to-Deposit (LTD) ratio can be used to investigate and avert liquidity problem in the banking sector. For this purpose, the data of Major British Banking Groups (MBBG) are collected and critically analysed. The findings of the study reveal that the banks which sustain the LTD ratio were able to successfully pass through the liquidity crisis of 2008, and other banks which rely more on borrowed funds or banks with increasing LTD ratio, became the victim of financial crisis.

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OpenAlex reports 6 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

Liquidity risk is an on-going issue since the emergence of liquidity crisis of 2008. This paper aims to contribute to the discussion on how Loan-to-Deposit (LTD) ratio can be used to investigate and avert liquidity problem in the banking sector. For this purpose, the data of Major British Banking Groups (MBBG) are collected and critically analysed. The findings of the study reveal that the banks which sustain the LTD ratio were able to successfully pass through the liquidity crisis of 2008, and other banks which rely more on borrowed funds or banks with increasing LTD ratio, became the victim of financial crisis.

Key concepts: Market liquidity, Liquidity crisis, Solvency, Financial system, Loan, Liquidity risk, Accounting liquidity, Business

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