Browsing by Author "Melak Tirualem"

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    Practice of Commercial Banks in Ethiopia Assessment of Liquidity Risk Management
    (Addis Ababa University, 2009-06) Melak Tirualem; Gebrehiwot Gebremedhin
    The main purpose of the study was to assess the liquidity risk management practice of commercial banks in Ethiopia. To deal with the problem, three fundamental research questions were formulated that stress on the impact of liquidity on performance of banks, the existence of standardized liquidity risk management strategy(practice) and the impact of the directives of NBE on the performance of commercial banks in Ethiopia. To conduct the study, descriptive method was employed. Purposive sampling was used in the selection of each bank and the respondents from the respective bank. Thus a total of 30 respondents participated to the sources of primary data for the study. Data were collected through questionnaire, interview and annual reports of each commercial bank. The data collected from primary and secondary sources were organized using tables and graphs ad interpretation was made on the data using quantitative and qualitative methods. The findings of the study revealed that there is no uniform (standardized) liquidity risk management policy and procedure in the banking industry which is for all commercial banks in Ethiopia. The directives issued by NBE have no significant impact that will affect the performance of commercial banks instead they are important for the normal operations of banks and the industry in general. The over all liquidity position of commercial banks is excess which is caused by low economic development and existence of limited financial instruments in the country. Liquidity position of a bank has an impact on the performance of the bank. Too much liquidity position of a bank decreases the performance of the respective bank unless the excess liquidity position is managed properly. Among the factors that influence liquidity risk management by commercial banks in Ethiopia include: absence of secondary markets, lack of enough financial instruments and absence of strong management information system. Finally, recommendations were forwarded based on the major findings so as to improve the liquidity risk management practice of commercial banks in Ethiopia