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After giving a rundown on banks liquidity risk and management, and suggesting a simple model aiming at improving the efficiency of banks liquidity management, this paper gauges the possible impact of the current crisis on the GCC economies, specifically the exposure of banks to asset write-downs, and rising costs of finance coupled with tight liquidity. The current outlook is exceptionally uncertain, with risks still weighing on the downside. The banking system appears adequately capitalized and highly profitable, but risks of a future deterioration of asset quality are still threatening the banks financial situation. Fundamental measures should be taken in order to strengthen the banking supervision to contain the fiscal risks related to the emergency liquidity facilities.
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