BANKS IN CURRENCY BOARD SYSTEMS AND LIMIT ON MINIMUM LIQUIDITY POSITION IN NATIONAL CURRENCY *

Transcription

1 BAKS I CURRECY BOARD SYSTEMS AD LIMIT O MIIMUM LIQUIDITY POSITIO I ATIOAL CURRECY * Srečko Devjak ** Receved: Prelmnary communcaton Accepted: UDC: Banks n countres wth currency board arrangements are exposed to the rsk of llqudty n ther natonal currency, whch s drven by currency board stablty. In lne wth lqudty rsk appette, banks need to restrct ther own rsk exposure wth a lmt on mnmum lqudty poston n the natonal currency. Ths paper presents mathematcal dervatons of a lmt on mnmum lqudty poston n the natonal currency, whch depends on the busness envronment and on the currency structure of the balance sheet. Algebrac calculaton n ths paper s of partcular nterest to banks, whch do busness n countres wth currency board arrangements.. ITRODUCTIO Recent busness envronment s demandng for corporatons, due to the reduced aggregate demand and ncome. Decreased ncome and reduced credtworthness of corporatons s also reflected n reduced credtworthness of the government. Soveregn rsk n ths case ncreases as reduced ncome of corporatons reduces tax bass and, consequently, taxes, whch are ncome of the state budget. If a country uses currency board arrangement, then ncreased soveregn rsk endangers the stablty of the currency board, as hgher soveregn rsk reduces opportuntes for rasng new governmental debt whch ncreases the probablty of reducng foregn exchange reserves (Ganevet al, 202). * The vews expressed n ths paper are those of the author and do not necessarly reflect the vews of the Raffesen Bank Internatonal AG. ** Prof. Srečko Devjak, PhD, Raffesen Bank Internatonal AG, Am Stadtpark 9, 030 Venna, Austra, Phone: , Fax: , E-mal: srecko.devjak@ rbnternatonal.com 45

2 46 Management, Vol. 9, 204,, pp Endangered stablty of the currency board rases the lqudty rsk n banks as clents prefer reserve currency to natonal currency. Ths, on the one hand, reduces stckness and rollovers of deposts, and on the other shortens the expected maturty of deposts wthout contractual maturty. Both reasons delver net outflows of deposts from a bank. A bank n a bankng system wth currency board should therefore montor stablty of the currency board and consequently buld results of correspondng analyss n ts lqudty rsk management system. The goal of ths paper s to show how a bank can set a poston lmt and control ts exposure to lqudty rsk, whch s drven by the stablty of a currency board. The lmt wll be calculated wth mathematcal dervaton from ratos for measurement of currency board stablty. After showng the ratos for measurement of currency board stablty, ths paper explans the multcollnearty among them and calculates the lmt on mnmum lqudty poston n the natonal currency. The lmt on mnmum lqudty poston n the natonal currency wll only be calculated algebracally. Calculatng the absolute lmt based on sample data s left to ndvdual banks as the sample data of each bank s confdental and therefore not avalable to the publc. A revew of the exstng lterature shows that no paper explans the dervaton of a nonregulatory lqudty lmt. Unlke the exstng lterature, ths paper explctly explans how t s possble to calculate a lmt on a mnmum lqudty poston n the natonal currency. Ths s what makes ths paper orgnal. 2. THEORETICAL BACKGROUD Currently, there are two countres n Europe that have currency board arrangements. These are Bosna and Herzegovna and Bulgara. Estona and Latva had currency board arrangements n the past, but now both countres are a part of the Euro area. Ths s an expected consequence f we take nto account that currency boards have been suggested as the proper exchange rate regme for potental European unon (EU) and European Economc and Monetary Unon (EMU) entry countres (de Haan et al., 200). Ths was also confrmed by Mnea and Rault (20) research results on the currency board n Bulgara. They concluded that adoptng the currency board may have worked as a rather good devce for ntegratng Bulgara nto the EMU. The hstory of currency board systems snce 990 has shown that ths specal form of the exchange rate system can ease the consequences of fnancal shocks and can help to stablze the economy after currency crses. The hstory has shown that the ntroducng a currency board system can delver hgh credblty to the natonal currency and consequently reduce nflaton rate,

3 Management, Vol. 9, 204,, pp whch was experenced by some countres not havng consderable experence n central bankng lke Estona and Lthuana (Grmm, 2007). Based on the data from Bulgara, Carlson and Valev (200) showed that a currency board system n general reduces the expected nflaton, but to varous degrees for dfferent agents. Dfferences exst as agents dfferently trust the dsnflaton rhetorc of the polcymakers who are not equally famlar wth the operaton of the currency board. A currency board can encourage fscal dscplne. If the fscal authortes know that the budget defct cannot be monetzed, ther ncentves to have large defcts wll be reduced (de Haan, et al., 200). The man dsadvantage of currency board arrangements s the loss of ndependent monetary polcy. Countres wth currency board arrangements deal wth loss of Central Bank functons whch are especally mportant n case of problems wth lqudty n the bankng sector. They are not able to supply extra lqudty to the bankng system or ndvdual banks (Ganč, 202).The loss of the lender of last resort functon of the central bank can mean the loss of a safety net for the fnancal sector. The natonal authortes n ths case should ensure that fnancal nsttutons have adequate captal and access to credt markets abroad. The absence of the lender of last resort functon of the central bank reduces the moral hazard problem of bankng management and/or supervson, because f banks are n dffcultes, there s no one to save them. Automatc access to lqudty can be facltated by usng reserve requrements as ntroduced n a number of currency board arrangement countres (de Haan et al., 200). To reman confdent n the currency board, foregn exchange reserves should be suffcent to cover outstandng value of relevant labltes at the chosen exchange rate. Where confdence s lackng, ths proporton needs to be 00 percent (Bennett, 993). Under the currency board system, unlke the practce when a country has a central bank, the commercal banks may be allowed or requred to hold a sgnfcant part or all of ther reserves denomnated n the reserve currency (Peterson Insttute for Internatonal Economcs, 203). enovsky and Hrstov (2002) explan the new generaton of currency boards, whch, to varyng degrees, preserve the ablty of the central bank to functon as the lender of last resort and to ntervene n case of a systemc rsk. Such currency board exsted n Argentna, Estona and Lthuana, and stll exsts n Hong Kong and Bulgara. The ntroducton of ths second-generaton currency board offers an opportunty to conduct monetary polcy, whch does not have ts typcal mage. 47

4 48 Management, Vol. 9, 204,, pp Chobanov and enovsky (2004) clam that currency boards and golden standard as monetary regmes have a number of smlartes. Besdes credblty and confdence, there are two addtonal smlartes. Frst, there s the automatc mechansm whch lnks money demand and supply to the balance of payments and leads to a relatvely quck adjustment of emergng mbalances n the economy. Automatsm means that the balance s adjusted (restored) after a shock wthout the nterventon of a central monetary authorty. Automatc mechansm requres flexblty especally n the nterbank money market. Second, both monetary regmes sgnfcantly constran the domestc economc polces. Frank (2004) descrbes several condtons that make a currency board sustanable. A country wth a currency board has to abandon the ndependent monetary polcy and has to duplcate the country s monetary polcy wth the anchor currency. The most mportant feature of the anchor currency s ts stablty, so the country should choose one of the major currences for the anchor currency, whch s also the natonal currency of ther trade partner. Furthermore, countres need to mplement a new regme n the natonal legslaton as t s very mportant that the monetary authorty and the government te themselves to the currency board regme. Due to the absence of the lender of last resort functon, adequate regulaton of the fnancal sector should be ensured. Wth proper regulaton, the need for the lender of last resort functon wll not appear. Another condton s labor market flexblty. Frank (2004) states that, f the anchor currency apprecates, wages should fall, n order to keep foregn prces and compettveness of the domestc ndustry unchanged. Gurtner (2004) states that a canddate country for a currency board should not be subject to massve and frequent terms of trade shocks (demand shock n tradng partner should have lmted effect on the domestc export ndustry). So,the country should have several tradng partners and dstrbute ts exports among them. In addton, low debt of the government s necessary to ensure the sustanablty of the currency board. Frank (2004) states that, when default must be taken nto consderaton, nterest rates soar and t becomes ncreasngly dffcult to refnance the country s debt. Thus, a frm commtment to budget balance by the government s hghly mportant. If a country does not take nto account all the condtons mentoned above, t s probable that the currency board wll collapse. Ths happened n 2002 to Argentna, although t had had a successful currency board arrangement for more than ten years. The currency board n Argentna collapsed manly due to fscal polcy and the devaluaton of the natonal currency n Brazl. Frank

5 Management, Vol. 9, 204,, pp (2004) stated that fscal polcy n Argentna was one of the central ssues leadng to the breakdown of the currency board, especally the mperfect fscal polcy and dffcult nternatonal fnancal envronment. The fnancal envronment changed when n the early 999 Brazl, Argentna s man and most mportant tradng partner, abandoned ts peg to the USD and left BRL floatng. There s a recommendaton that a major part of the country s trade should be wth the anchor economy. Argentna chose the USD as an anchor currency, mostly because of ts stablty. The devaluaton of BRL made Argentnean goods much more expensve n Brazl, leadng to the negatve shock wth Argentna s most mportant tradng partner. Argentna could have responded wth labor market reforms. Gurtner (2004) argues that the flexblty of the labor market s the key to the currency board sustanablty. Mulno (2002) proves the same wth a second generaton model. A currency board system can become vulnerable to a currency crss n case of unemployment persstence. However, labor markets n Argentna were hghly nflexble durng the currency board era. Deprecaton of BRL aganst ARS became a growng problem and government was unable to enforce labor market reforms aganst the pressure of the unons. 3. LIQUIDITY RISK MAAGEMET I BAKS AD COLLAPSE OF A CURRECY BOARD Determnants of lqudty n the bank were nvestgated by several authors. Vodova (20) dentfed determnants of lqudty n Czech commercal banks. The determnants of lqudty were dentfed usng bank specfc data and were emprcally based on macroeconomc data over the perod from 200 to A multple regresson model shows lqudty of a bank s, on the one hand postvely related to captal adequacy, nterest rates on loans, share of nonperformng loans and nterest rate on nterbank transacton, but on the other hand negatvely related to nflaton rate, busness cycle and fnancal crss. Relaton between sze of banks and ther lqudty s ambguous. The determnants of lqudty of Slovak commercal banks were explaned n Vodova (202). The determnants of lqudty of commercal banks n Romana were dentfed by Munteanu (202). A multvarate regresson model shows the crss brought about substantal changes n the structure of bank lqudty determnants. In tmes of crss, the fracton of macroeconomc determnants ncreases and the fracton of bank specfc determnants decreases. De Haan and van den End (203) explan usng emprcal analyss that the banks usually hold more lqud assets aganst ther stock of lqud labltes as requred by the regulaton. Banks wth stronger captal poston hold less lqud assets aganst ther stock of lqud labltes, 49

6 Management, Vol. 9, 204,, pp whch shows an nteracton between captal and lqudty buffers. However, ths nteracton appears to be weaker durng a crss because of the mpact of crss on portfolo of the bank that consequently makes the captal of the bank questonable. Ths s confrmed by the experence of banks n Argentna. Durng the crss n 200, the banks n Argentna had many lqudty ssues. The bankng sector functoned manly n USD, so the banks had short term labltes manly n USD. At the same tme, the stock of lqud assets n USD by banks and the stock of nternatonal reserves n USD were not enough to cover the fnancal labltes of the consoldated fnancal system. And moreover, the lender of last resort was not avalable (Kguel, 20). People realzed that there were not enough USD n the system to cover all the deposts and between July and ovember 200 they wthdrew around 5 bllon USD from the banks. Three natonal banks (Banco de Galca, Banco de la acón and Banco de la Provnca de Buenos Ares) were partcularly affected. To save them, the government set a cap of,000 USD on bank wthdrawals per customer per month. Ths decson pushed the people of Argentna to the streets and resulted n the collapse of currency board regme (The Economst, 2002). 4. FORMAL CURRECY BOARD ARRAGEMET STABILITY CRITERIA A set of formal currency board arrangement stablty crtera s composed of eght ratos (Ganevet al, 202):. FX reserve coverage of the monetary base. Wthn an orthodox currency board there should be notes and cons n crculaton (monetary aggregate M0) covered by reserve currency. The bgger the dfference between FX reserves and M0, the greater the stablty of the currency board. Bulgara decded that FX reserves n euros should not only cover M0, but also bank reserves at the Central Bank. 2. FX reserve (less government depost) coverage of the monetary base. Ths rato excludes the government deposts from the FX reserves and evaluates the stablty of the currency board n case government keeps savngs outsde the Central Bank. The stablty of the currency board s shown f value of ths rato equals at least. An addtonal buffer wll ncrease the stablty of the currency board. 50

7 Management, Vol. 9, 204,, pp FX reserve coverage of the natonal currency denomnated part of M2. The stablty of a currency board s also determned by FX reserve coverage of the natonal currency denomnated part of M2. Ths ndcator roughly measures the percentage of natonal currency denomnated cash and deposts, whch could be converted to reserve currency n case of a currency crss. To a great degree, ths should also be consdered an extreme case, as n the event of a currency crss and the followng bank runs, the chance that the entre money supply (measured by M2) would be converted nto reserve currency s very small. 4. Rato between money outsde banks and the sum of deposts. If the value of ths raton ncreases, the probablty of quck converson of the natonal currency nto reserve currency also ncreases. A value rse of ths rato shows an ncreasng propensty to rase cash holdngs and decrease deposts n order to ncrease the ablty of converson to reserve the currency. Consequently, ths rato measures the trust n the bankng system and n the governmental polcy. 5. Sgnfcant varaton n demand for notes and cons. Currency rsk exsts f we can see hgher varablty of demand for notes and cons n a perod compared wth varablty of the same random varable n the precedng perod (Ganevet al, 202). Measures of varablty are measures of uncertanty and, consequently, measures of rsk. Assume fnancal nvestors are rsk averse and assume they demand notes and cons n stress free envronment on fnancal markets. Consequently, we can assume the probablty dstrbuton of daly demand for notes and cons s normal and varance can be used as a measure of rsk. If d s daly demand for notes and cons and f s n the number of days n 2 observaton, then the varance of daly demand for notes and cons s d s defned as follows: n n = ( ( )) = n s d d E d d d (). n = n = n = 6. Abrupt changes n the currency structure of deposts. Rapd replacement of deposts denomnated from the natonal to reserve currency ndcates fear of fnancal nvestors and presence of currency rsk (Ganevet al, 202). If a fracton of deposts n the natonal currency follows a monotonous upward trend n tme, then we can conclude that 5

8 52 Management, Vol. 9, 204,, pp fnancal nvestors estmate the currency rsk s reducng. If a fracton of deposts n the natonal currency remans unchanged n tme, then we can conclude that fnancal nvestors estmate the currency rsk as stable. Fnally, f a fracton of deposts n the natonal currency follows a monotonous downward trend n tme, then we can conclude that fnancal nvestors estmate currency rsk s rsng and the stablty of currency board s reducng. 7. Balance of payments dynamcs. Changes n the balance of payments are drectly reflected n the changes of the FX reserves volume. The defct n the balance of payments reduces the amount of the FX reserves and the surplus n the balance of payments ncreases the amount of the FX reserves. The tendency to defct n balance of payments wll n tme result n the reducton of the FX reserves. If x s the amount of defct n year, f y j s the amount of surplus n year j and f Z s the amount of FX reserves, then n subsequent m + n years holds: n m x = j= y j = Z 8. Budget defcts unmatched by fnancng outsde the fscal reserve. The nablty to rase government debt forces a country to reduce FX reserves and to use government reserves for fnancng the budget defct. The reducton of FX reserves ncreases currency rsk and reduces the stablty of the currency board (Ganevet al, 202). 5. CALCULATIO OF A LIMIT O LIQUIDITY POSITIO I THE ATIOAL CURRECY Lqudty rsk conssts of several rsk categores. One of the categores s the rsk of currency board stablty. To calculate the mnmum lqudty poston n the natonal currency, we wll assume that the stablty of a currency board s the only drver of lqudty rsk. We wll gnore all other categores of lqudty rsk. The stablty of a currency board s also determned wth FX reserve coverage of the natonal currency denomnated part of M2. Ths rato roughly measures the percentage of natonal currency denomnated cash and deposts, whch could be converted to reserve currency n case of a currency crss. To a (2).

9 Management, Vol. 9, 204,, pp great degree, ths should also be consdered an extreme case, as n the case of currency crss and bank runs, the chance that the entre money supply (measured by M2) would be converted to reserve currency s very small (Ganevet al, 202). Assume ths rato s an ultmate measure of the currency board stablty. Let M2 (LCY) be the natonal currency denomnated part of M2 and let FXR (RCY) be the amount of FX reserves n reserve currency. Also assume, the value of FX reserve coverage of the natonal currency denomnated part of M2 rato s: FXR( RCY ) = a (3). M 2 LCY ( ) Before we calculate the lmt on the natonal currency lqudty steerng n a bank, we need to redefne macroeconomc rato on a mcroeconomc level wthn a bankng system. IMF (203) defnes foregn exchange reserve as assets of the central bank for coverng ts labltes. Foregn exchange reserve can be denomnated n currences, whch do not nclude the natonal currency as the central bank cannot have a clam to tself. If A (RCY) are assets of a commercal bank n reserve currency, then a commercal bank holds: ( RCY ) A( RCY ) FXR = (4).. The proper level of foregn exchange reserves s explaned n several papers, for example IMF (200), IMF (20), de Beaufort Wjnholds and Kapteyn (200) and Roger (993). As explaned by Mshkn and Eakns (999), labltes of the central bank are composed of currency n crculaton and of bank reserves wth the central bank. The currency n crculaton s equvalent to current accounts n commercal banks as s currency n crculaton mmedate oblgaton of the central bank to the holder of the natonal currency. Bank reserves are the lablty of the central bank, whch s smlar to term deposts n commercal banks as bank reserves are oblgatory for banks. Let D(LCY) be the deposts of a commercal bank n the natonal currency. Then for a commercal bank holds M 2 ( LCY ) = D( LCY ), and along wth equaton (4), also: 53

10 Management, Vol. 9, 204,, pp ( RCY ) ( ) A D LCY = a (5). If we mark total assets wth TA, then t consequently holds: TA D A( LCY ) ( LCY ) = a (6), A A ( LCY ) A TA D LCY ( ) ( LCY ) ( LCY ) A = a (7), D ( LCY ) TA ( ) D( LCY ) A D LCY = a (8), TA = a D( LCY ) (9), D( LCY ) ( LCY ) TA a D( LCY ) = (0), ( LCY ) D( LCY ) = TA a D( LCY ) D( LCY ) A (), ( LCY ) D( LCY ) = TA ( + a) D( LCY ) (2). The last equaton holds for all maturtes on the balance sheet level. If A ( LCY ) s an nflow on tme nterval and f D ( LCY ) s an outflow on tme nterval, then on the total balance sheet level holds: n = ( A ( LCY ) D ( LCY )) = TA ( + a) D ( LCY ) n (3). = 54

11 Management, Vol. 9, 204,, pp Banks usually want to keep accumulated net cash flows ceters parbus above the absolute lmt up to and ncludng tme nterval < n. Therefore, t holds: = ( A ( LCY ) D ( LCY )) TA ( + a) D ( LCY ) (4). Let y be the stablty of a currency board. If x s FX reserve coverage of the monetary base, then x2 s FX reserve less government depost coverage of the monetary base, x 3 s FX reserve coverage of the natonal currency denomnated part of M2, x 4 s the rato of money outsde banks to the sum of deposts, x 5 s sgnfcant varaton n demand for notes and cons, x 6 are the abrupt changes n the currency structure of deposts, x 7 s the balance of payments dynamcs, and x 8 are budget defcts unmatched by fnancng outsde the fscal reserve, then we can estmate y wth the followng sample regresson model (Gujarat, 995): = 8 y = a + bjxj + u j = (5). Assume that multcollnearty exsts, such that holds: λ x λ x + λ x + ϕ 0 (6), m =, 8 k = 4 λ + φ = 0 (7). x k k n In equatons (6) and (7), 2,..., 8 ϕ m and φ n are stochastc terms and λ, λ λ are constants. When calculatng lqudty lmt we have to use the largest volume of nformaton about currency board stablty possble. Wth ths, we make sure y as a coherent rsk measure of currency board stablty s reflected n the lmt. The coherency of rsk measure y s proven wth 55

12 Management, Vol. 9, 204,, pp coeffcent of determnaton f ndependent varables n the regresson model explan the majorty of dependent varable varablty. Based on the assumpton of multcollnearty among ndependent varables, FX reserve coverage of the natonal currency denomnated part of M2 rato has to be combned wth any varable x k k { 4, 5, 6, 7, 8} at calculaton of the lqudty lmt. If partal correlaton coeffcent between any ndependent varable s x k k { 4, 5, 6, 7, 8} and y s the hghest for abrupt changes n the currency structure of deposts, then abrupt changes n the currency structure of deposts should be used along wth FX reserve coverage of the natonal currency denomnated part of M2 at calculaton of the lqudty lmt. Currency board stablty s defned wth a stuaton n busness envronment of a bank, therefore, there should be a lqudty lmt calculaton n the bank lnked to a stuaton n the busness envronment of the bank. The hgher currency board stablty, the hgher can be the bank lmt on lqudty poston n the natonal currency. Smlarly, the lower currency board stablty, the lower may be lmt on lqudty poston n the natonal currency. As we can see the currency board stablty and the lmt on lqudty poston n the natonal currency are n a lnear relatonshp. The deposts n a bankng system are composed of deposts n the natonal currency and deposts n other currences. The deposts n the natonal currency are labeled wth g and those n other currences wth h. Then, the fracton of g deposts n natonal currency s defned wth g + h. = As t holds: ( A ( LCY ) D ( LCY )) TA ( + a) D ( LCY ) and as TA ( + a) D ( LCY ) = (8), = s a lmt value n the case of full stablty of the currency board, then the lmt value n the case of partal stablty of currency board equals: 56

13 Management, Vol. 9, 204,, pp g TA ( + a) D ( LCY ) (9). g + h = If g 0 then: lm 0 g 0 TA + h = 0 + h = g g ( + a) D ( ) LCY = TA ( + a) D ( LCY ) = 0 (20). The dervaton above confrms that the approprate lmt on mnmum lqudty poston n the natonal currency s zero n case there s no stablty of currency board. If there s no stablty of currency board, then fnancal nvestors hold no deposts wth banks n the natonal currency. All deposts they hold wth banks are deposts, denomnated n the reserve currency. And f h 0 then: g g g + h = g + 0 = lm TA ( + a) D ( ) LCY = TA ( + a) D ( LCY ) (2), h 0 g lm TA h 0 g + h ( + a) D ( ) LCY = TA ( + a) D ( LCY ) = = (22). The last equaton shows the approprate lmt on mnmum lqudty poston n the natonal currency n the case of a full stablty of the currency board. Ths s TA ( + a) D ( LCY ). If the full stablty of currency board = exsts, then fnancal nvestors fully trust the natonal currency and all deposts they have wth the banks are denomnated n the natonal currency only. The amount of deposts n other currences s therefore zero. The same s also clearly shown by the prevous equaton. 6. COCLUSIO The stablty of a currency board can be dentfed wth a set of ratos. Ths paper shows that the measurement of currency board stablty s possble wth a rsk measure, whch s a dependent varable of a sample regresson model wth ratos for dentfyng currency board stablty as ndependent varables. The coherency of such a rsk measure s proven wth the coeffcent of determnaton 57

14 58 Management, Vol. 9, 204,, pp f ndependent varables n the regresson model explan the majorty of dependent varable varablty. A sample regresson model should not nclude multcollnearty. Therefore, not all ratos for dentfcaton of currency board stablty can be ncluded nto the sample regresson model. Consequently, n the sample regresson model ratos wth nsgnfcant addtonal nformaton about currency board stablty are not ncluded. Mathematcal dervaton shows t s possble for a bank to calculate a lmt on mnmum lqudty poston n the natonal currency out of ratos for dentfyng currency board stablty. When calculatng lqudty lmt, the largest possble volume of nformaton about currency board stablty should be used. Ths assures the rsk measure for measurement of currency board stablty s reflected n the lmt. The result of algebrac calculaton confrms a lnear relatonshp between currency board stablty and the lmt on mnmum lqudty poston n the natonal currency. The hgher currency board stablty, the hgher can be the bank lmt on lqudty poston n the natonal currency. Smlarly, the lower currency board stablty, the lower may be lmt on lqudty poston n the natonal currency. REFERECES. Bennett, A. (993). The operaton of the Estonan currency board. IMF Staff Papers 40 (2), pp Carlson, J. A. & Valev,. T. (200). Credblty of a new monetary regme: The currency board n Bulgara. Journal of Monetary Economcs, 47 (3), pp de Beaufort Wjnholds, J. O. and Kapteyn, A. (200). Reserve Adequacy n Emergng Market Economes. IMF Workng Paper seres 0/ dehaan, J., Berger, H. & van Fraassen, E. (200). How to reduce nflaton: an ndependent Central Bank or a currency board? The experence of the Baltc countres. Emergng markets revew, 2 (3), pp dehaan, L. & van den End, J. W. (203). Bank lqudty, the maturty ladder, and regulaton. Journal of Bankng & Fnance, 37 (0), pp Frank, D. (wnter ). How Currency Boards Collapse - The Case of Argentna. Insttute for Foregn Trade and Payments and European Integraton, Economcs department, Unversty of Basel, Swtzerland. 7. Ganev K., Vdnova H. & Stelzeneder M. (202). Bulgara: Currency board specal. Venna: RaffesenResearch. Retreved on 24th ovember

15 Management, Vol. 9, 204,, pp from: _ _ A--A.html 8. Ganć, M. (202). Perspectves of Applcaton of Currency Board Arrangement wth Specal Emphass on Bosna and Herzegovna. Internatonal Journal of Busness and Socal Scence, 3 (4), pp Grmm, O. (2007). Fscal Dscplne and Stablty under Currency Board Systems. Center of economcs research at ETH workng paper seres 07/66, Center of economc research Zurch. 0. Gujarat, D. (995). Basc Econometrcs. Sngapore: McGraw-Hll.. IMF (200): Issues n Reserves Adequacy and Management. Retreved on 24th ovember 203 from: 200/050.pdf 2. IMF (20): Assessng Reserve Adequacy. Retreved on 24th ovember 203 from: 3. IMF (203): Revsed Gudelnes for Foregn Exchange Reserve Management. Retreved on 24th ovember 203 from: external/np/pp/eng/203/0203.pdf 4. Gurtner, Francos J. (2004).Why Dd Argentna s Currency Board Collapse? World economy, 27 (5), pp Kguel, M. (20). Argentna s 200 Economc and Fnancal Crss: Lesson for Europe. Thnk Tank 20: Beyond Macroeconomc polcy coordnaton dscussons n the G-20, pp Mnea, A. & Rault, C. (20). External Monetary Shocks and Monetary Integraton: Evdence from the Bulgaran Currency Board. Economc Modellng, 28 (5), pp Mshkn, F. S. & Eakns, S. G. (999). Fnancal markets and nsttutons. Thrdedton. ew York: Addson Wesley Longman, Inc. 8. Mulno, M. (2002). Currency boards, credblty and crses. Economc Systems, 26 (4), pp Munteanu, I. (202). Bank Lqudty and ts Determnants n Romana. Proceda Economcs and Fnance, 3 (), pp enovsky,. & Hrstov, K. (2002). The new currency boards and dscreton: emprcal evdence from Bulgara. Economc Systems, 26 (), pp Peterson Insttute for Internatonal Economcs, Chapter 5: Currency boards, pp Retreved on 24th ovember 203 from: publcatons/chapters_prevew/342/5e3365.pdf 22. Roger, S. (993): The management of foregn exchange reserves. Basel: BIS Economc Papers seres

16 Management, Vol. 9, 204,, pp Vodova, P. (20). Lqudty of Czech Commercal Banks and ts Determnants. Internatonal Journal of Mathematcal Models and Methods n Appled Scences, (6), pp Vodova, P. (202). Lqudty of Slovak commercal banks and ts determnants. In Stavarek, D. and Vodova, P. (Eds.): Proceedngs of the 3th Internatonal Conference on Fnance and Bankng. Karvná, Slesan Unversty, pp The Economst. (2002, February 28). Argentna s collapse: A declne wthout parallel. BAKE U SUSTAVU VALUTOG ODBORA I LIMIT A MIIMALU LIKVIDOSU POZICIJU U ACIOALOJ VALUTI Sažetak Banke u državama s valutnm odborom zložene su rzku nelkvdnost u naconalnoj valut, a koja ovs o stablnost aranžmana. U skladu s apettma u preuzmanju rzka lkvdnost, banke trebaju ogrančt vlasttu zloženost rzku, korsteć lmt na mnmalnu lkvdnosnu pozcju u naconalnoj valut. U ovom se radu prezentraju matematčk zvod mnmalne lkvdne pozcje u naconalnoj valut, u ovsnost od poslovnog okruženja valutne strukture blance. Algebarsk zračun, prezentran u radu, od posebnog je nteresa za banke, koje posluju u uvjetma valutnog odbora. 60