Determinants of the Liquidity in Romanian Interbank Deposits Market

A robust liquidity position is a prerequisite for the banking system to function properly and to provide credit to real sector. When Lehman Brothers collapsed in September 2008, the liquidity shock wave hit the Romanian banking system, causing severe disruptions in credit activity. Banks become reluctant to lend money to other banks and hoard liquidity if they fear of defaults in banking sector or anticipate liquidity shortage. The purpose of this paper is to assess the factors with strong influence over the liquidity of interbank deposits market using the OLS estimator. The results show influence in case of banks funding structure and market share of foreign banks in the banking system as well.