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Management of Liquidity and Profitability in Commercial Banks

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Reliability and Statistics in Transportation and Communication (RelStat 2018)

Part of the book series: Lecture Notes in Networks and Systems ((LNNS,volume 68))

Abstract

Issues of liquidity and profitability management are currently highly topical for every commercial bank. Those banks, which operate with surplus liquidity, encounter the problem of profits that are less than optimal. Other banks, which conduct aggressive policy aiming to place all the available resources with maximum efficiency, are forced to seek solutions to the problem of locating additional liquid funds, in order to ensure timely fulfilment of liabilities. In this paper the author offers a methodology for evaluating the optimization of the balance between profitability and liquidity in commercial banks. This methodology is based on the analysis of bank’s active and passive operations, which results in determining the amount of effective (profitable) resources, which is compared with the actual amount of profitable assets to discover the level of optimization of profitability and liquidity. The potential application and viability of the offered methodology is shown on the example of Latvian commercial banks. After analysing active and passive operations of Latvian commercial banks, the author develops recommendations to optimise profitability and liquidity.

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Author information

Authors and Affiliations

  1. RISEBA University of Business, Arts and Technology, Meža str. 3, Riga, LV-1048, Latvia

    Natalia Konovalova

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  1. Natalia Konovalova
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Correspondence to Natalia Konovalova .

Editor information

Editors and Affiliations

  1. Transport and Telecommunication Institute, Riga, Latvia

    Igor Kabashkin

  2. Transport and Telecommunication Institute, Riga, Latvia

    Irina Yatskiv (Jackiva)

  3. Vilnius Gediminas Technical University, Vilnius, Lithuania

    Olegas Prentkovskis

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Konovalova, N. (2019). Management of Liquidity and Profitability in Commercial Banks. In: Kabashkin, I., Yatskiv (Jackiva), I., Prentkovskis, O. (eds) Reliability and Statistics in Transportation and Communication. RelStat 2018. Lecture Notes in Networks and Systems, vol 68. Springer, Cham. https://doi.org/10.1007/978-3-030-12450-2_70

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  • DOI: https://doi.org/10.1007/978-3-030-12450-2_70

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-12449-6

  • Online ISBN: 978-3-030-12450-2

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