Economics Research

Abstract The aim of this study is assessment of the combination of asset and liability on the banking supervision ratings. In this paper Camels Rating model is used for banking supervision rating. Also, by using financial statements of Iranian bank for the period 2006-2014 and ordinal regression method, we have investigated the effect of composition of the portfolio's assets and liabilities on banks’ ratings. The results of model validity, significance of regression and the prediction power tests show that the model is correct and it is suitability for future analysis and the predictive power of the model is 89 percent. The results show that the riskier the asset portfolio, the less likely the banks to be ranked higher in future periods and the more the probability of losing banks’ ratings in future periods. In addition, the more the share of stable sources in banks’ portfolio of liabilities, the higher the probability of having better ratings and the less the probability of losing banks’ ratings in future periods.

Abstract Bank liquidity increases the ability of banks in case of suddenly decreasing deposits and for the purpose of credit financing. The central bank as a policy-maker institution can play an important role in preventing a liquidity crisis, when the banks' liquidity risks have increased. One of the most important tools for central bank is liquidity injection in the banking system in a liquidity crisis. Since effectiveness of liquidity injection in reducing the probability of liquidity risk depends on the health status of the banks, in this paper we study the effect of liquidity injection on reducing liquidity crisis with a consideration for soundness of banking activities, using a a panel-logit model and balance sheet and income statement data for the period of 2006-2013. Results show that liquidity injection reduces liquidity risk and if one bank is more stable than other banks, it will have lower liquidity risk than others.