Determinants of liquidity risk in Turkish banking sector: Time series application

The banking sector, which is one of the most important elements in the functioning of the financial system, has a great importance in the functioning of the country's economies with its financial intermediary role. While the banking sector continues its activities, it is exposed to many risks due to its structure. One of these risks is liquidity risk. The Basel III accord aimed to set new standards in the liquidity management processes of banks. The aim of this study is to determine the banking sector-specific (internal) and macroeconomic (external) factors of the liquidity risk of the Turkish banking sector. In the liquidity risk model created for this purpose, the dependent variable is Liquid assets / Total assets, and the independent variables are; Non-performing loans / Total cash loans, Cash loans / Total deposits, Return on asset, Central Bank policy rate, Consumer price index and Gross domestic product are used. The data of the study covers the period of 2011/Q1–2022/Q3 and consists of a data set of 47 quarters. The time series ordinary least squares estimator was used to estimate the model. As a result of the analysis, a statistically significant relationship was found between liquidity risk and all independent variables. It has been concluded that the liquidity risk in the banking sector is increased by Non-performing loans / Total cash loans and loans in cash / Total deposit variables, while the return on assets ratio, the Central Bank policy rate, the consumer price index and the gross domestic product decrease. Keywords: Basel III, Financial system, Liquidity risk, Turkish banking sector