Fluctuations in Banking Sector Liquidity as a Symptom of Financial Instability : Selected Conclusions Based on an Analysis of the Banking Sector in Poland
The purpose of this article is to present the conditions in which liquidity is managed at the level of an individual bank, and the mutual relations between individual liquidity and the liquidity of financial markets. It also aims to demonstrate that fluctuations in the liquidity of financial markets are among the most important symptoms and consequences of financial instability. The background to the observations, which relate for the most part to the situation on the Polish interbank market, is the events in financial markets in the second half of 2008, resulting out of the subprime crisis on the American market. The article has been structured to achieve the objectives set out above. The starting point for these considerations is a definition of financial stability, emphasising individual and systemic liquidity as a condition of its preservation. The subsequent section is devoted to individual liquidity and its management, and then a section looking at the Polish market, presenting determinants of the liquidity of the banking sector and the role of the central bank in building confidence and liquidity. (fragment of text)
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