Liquidity Risks of Banks: Review of the Theory and Evidence

Liquidity risk of banks has been one of the major concerns for economists and researchers as liquidity provision is crucial for the ongoing viability of any banking organisation. Unlike risks that threaten the very solvency of a financial institution, liquidity risk is a normal aspect of the everyday management of a financial institution. However only in some cases do liquidity risk problems develop into solvency risk problems and these is obvious from a series of banking crises and panics that took place throughout the years.