Dimensions of liquidity

Liquidity (capacity to pay) manifests itself in a company in general and in a bank in particular in at least four forms. – First, there is short-term liquidity, i.e. the ability of a bank to meet current payment obligations at any time. – Long-term liquidity refers to the ability to raise sufficient refinancing funds with longer maturities without further ado. – Next, there is fungibility, i.e. the ability to sell financial products on the financial market at any time at a reasonable price in order to obtain cash when needed. – Finally, market liquidity must be considered as the ability to raise money on the markets at any time. – In the case of the subprime crisis, it became apparent that the latter two opportunities were suddenly no longer available. – See acid ratio, cash, stock market liquidity, liquidation, money market segments, money creation, liquidity, liquidity coverage ratio, liquidity ratio, liquidity position, liquidity premium theory, liquidity buffer, liquidity ratio, market liquidity risk, qick ratio, risk capacity, risk and solvency assessment, proprietary, solvency. – Cf. BaFin Annual Report 2008, p. 56 (liquidity risk management regulations).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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