The Impact of Bank Liquidity Risks on Banking Fragility An Applied Study on Traditional Private Banks in Syria""

Abstract

The risks of bank liquidity represent a crucial aspect in the banking industry, as they illustrate the bank's ability to meet financial requirements from unexpected withdrawal operations, debt obligations, and the provision of required credit facilities to customers. The bank's liquidity risks have a profound impact on banking fragility, which refers to the extent to which the bank is exposed to financial distress or failure. This impact could extend through the financial markets to the overall economy, leading to crises.

This study aims to elucidate the impact of bank liquidity risks on banking fragility for traditional private banks in Syria. To achieve the study's objectives, a descriptive approach was adopted in reviewing the relevant literature on the study's subject. Furthermore, an analytical approach was utilized through hypothesis testing and analysis of data derived from the annual reports of all traditional private banks listed in the Damascus Securities Exchange during the period (2010-2022), using the statistical software Eviews 12. The study found a positive impact of the maturity gap (L1) on both the Altman Z''-Score index (F1) and the Altman Z-Score index (F5), as well as the Minsky index (F6), and a negative impact on the capital to total assets ratio (F3). There is also a negative impact of the liquidity gap (L2, L3) on the capital to total assets ratio (F3). Additionally, there is a positive impact of the cash coverage ratio (L4) on the Altman Z''-Score index  (F1) and a negative impact on the Mulligan index (F4). In addition, there is a positive impact of funding liquidity risk (credit facilities to deposits) (L5) on the capital to total assets ratio (F3) and the Altman Z-Score index (F5), and a negative impact of the ratio of non-performing credit facilities to total credit facilities (F2). Lastly, there is a positive impact of funding liquidity risk (deposits to total assets) (L6) on the Altman Z''-Score index .F1)