the impact of multi-currency (dollarization) regime adoption on the liquidity challenges banks

Dhliwayo Takudzwa P0114070B i
DEDICATIONS
To my late mother Ms Rungamai Hove and Mrs Nyoni, this one is for you.

Dhliwayo Takudzwa P0114070B ii
ABSTRACT
The research study was aimed at analysing the impact of multi-currency (dollarization) regime
adoption on the liquidity challenges of Zimbabwean Banks (2009-2014). Secondary objectives of
the study were: to determine the causes of liquidity crisis in the Zimbabwean banking sector, to
evaluate the impact of liquidity crunch on economic growth; to examine the liquidity risk
management procedures that are deployed by commercial banks; to ascertain the impact of
capitalization on the liquidity of commercial banking institutions; and to determine the possible
corrective measures that can be instituted by the RBZ and the banking sector in combating
liquidity crunch in Zimbabwe‟s banks. The research study adopted a cross sectional survey
research design which focused on eleven commercial banks, economists, as well as the RBZ.
Primary data was gathered from the three aforementioned entities using well-structured
questionnaires and conducting personal interviews. Secondary data was obtained from relevant
published journals, the internet, RBZ website and other related texts on bank liquidity crisis to
fill data gaps that primary data could not address. The results of the analysis are presented
diagrammatically and expressed in percentages for ease of assessment and Bar charts, pie charts
and tables were employed to present the findings of the research. The research study results
revealed that the major causes of liquidity crisis were mostly the absence of lender of last resort
function by the RBZ, non-performing loans, diminished public confidence, maturity mismatches
and undercapitalization of the banks. Other than the aforementioned causes, they also deduced
from that banking malpractices due to laxity in proper and sound bank regulation and supervision
by the RBZ have a hand in the banking sector liquidity crisis. The study recommends that the
RBZ should instil back public confidence within the banking sector, should adopt stringent and
robust bank regulation and supervisory techniques and should establish a credit reference bureau.
Bank were urged to adopt the Basel Committee recommendations on capital adequacy liquidity
risk management, should consider restructuring their non-performing loans. The study also
further recommended government expedite the capitalization of the RBZ to resuscitate the lender
of last resort facility in the banking sector.

Dhliwayo Takudzwa P0114070B iii
ACKNOWLEDGEMENTS
I offer my utmost gratitude to the Almighty God, if it were not His mercy and grace, I would
have not been where I am today. I would like to express my profound gratitude to my supervisor
Miss.S.Chaibva for mentoring me throughout this research study relentlessly. Thank you, for not
giving up on me. Special thanks go to the Dhliwayo, Musekwa, Makandise and Ndaba families
for their financial and emotional support and also for being there for me all the time when I
needed them the most. Thank you very much, I am what I am because of you. Many thanks go to
my friends and my fellow banking students who have been there also giving me advise and
cheering me on even when the odds seemed insurmountable.

Dhliwayo Takudzwa P0114070B iv
LIST OF ABBREVIATIONS
RBZ - Reserve Bank of Zimbabwe
BCBS - Basel Committee on Bank Supervision
ECB - European Central Bank
CEBS - Committee of European Banking Supervisors
FSA - Financial Service Authority
NBR - National Bank of Rwanda
NRB - Nepal Reserve Bank
NPLs - Non-Performing Loans
LLR - Lender of Last Resort
CBZ - Commercial Bank of Zimbabwe
MPS - Monetary Policy Statement
ALCO - Asset and Liability Committee
ABC - Activity Based Costing
MIS - Management Information Systems
ZAMCO - Zimbabwe Asset Management Company
IMF - International Monetary Fund
BFIs - Banking Financial Institutions

Dhliwayo Takudzwa P0114070B v
TABLE OF CONTENTS
DEDICATIONS.........................................................................................................................................i
ABSTRACT.............................................................................................................................................. ii
ACKNOWLEDGEMENTS..................................................................................................................... iii
LIST OF ABBREVIATIONS.................................................................................................................. iv
LIST OF FIGURES ................................................................................................................................. ix
LIST OF TABLES.................................................................................................................................... x
CHAPTER ONE.......................................................................................................................................1
1.0 Introduction.........................................................................................................................................1
1.1 Background to the Study.....................................................................................................................1
1.2 Statement of the Problem....................................................................................................................2
1.3 Research Objectives............................................................................................................................3
1.3.1 Primary Objectives...........................................................................................................................3
1.3.2 Secondary Objectives.......................................................................................................................3
1.4 Research Questions.............................................................................................................................3
1.5 Justification of the Study ....................................................................................................................4
1.6 Scope of the Study ..............................................................................................................................4
1.7 Study Limitations................................................................................................................................5
1.9 Organisation of the Study ...................................................................................................................6
CHAPTER TWO ......................................................................................................................................7
LITERATURE REVIEW .........................................................................................................................7
2.0 Introduction.........................................................................................................................................7
2.1.0 THEORETICAL LITERATURE ....................................................................................................7
2.1.1 Causes of the Liquidity Challenges .................................................................................................7
2.1.1.1 Bank Runs.....................................................................................................................................7
2.1.1.2 Competition...................................................................................................................................8
2.1.1.3 Financial Liberalization ................................................................................................................9
2.1.1.4 Moral Hazard ................................................................................................................................9
2.1.1.5 Poor Asset Quality Assessment ..................................................................................................10
2.1.1.6 Non-Performing Loans (NPLs)...................................................................................................10
2.1.1.7 Maturity Mismatches ..................................................................................................................11
2.1.1.8 Absence of a Functional Lender of Last Resort Role .................................................................11

Dhliwayo Takudzwa P0114070B vi
2.1.1.9 Diminished or Low Customer Banker Relationship ...................................................................12
2.1.2 Impact of Liquidity Crisis on Economic Growth...........................................................................12
2.1.2.1 The Credit Crunch Hypothesis....................................................................................................13
2.1.2.2 Diminished or Reduced Consumer Confidence..........................................................................13
2.1.2.3 Information Costs........................................................................................................................14
2.1.2.4 Limited Long-term Credit Lines.................................................................................................14
2.1.2.5 Output Losses..............................................................................................................................14
2.1.3 Liquidity Risk Management Procedures and Policies adopted by Banks......................................14
2.1.3.1 Transparency...............................................................................................................................15
2.1.3.2 The Cash-Flow Constraint ..........................................................................................................15
2.1.3.3 Liquidity Management Policies Instated by Banks.....................................................................15
2.1.3.4 Analysis of Liquid Assets ...........................................................................................................16
2.1.3.5 Liquidity Management Strategies ...............................................................................................16
2.1.3.5.1 Contingency Liquidity Planning..............................................................................................16
2.1.3.5.2 Limits on Maturity Mismatches...............................................................................................16
2.1.3.5.3 Maintaining Stock of Liquid Assets.........................................................................................17
2.1.3.5.4 Diversification of Liabilities....................................................................................................18
2.1.3.5.5 Intra-Group Liquidity...............................................................................................................18
2.1.3.5.6 Foreign Currency and Other Markets ......................................................................................19
2.1.4 Impact of Capitalization on Banks Liquidity.................................................................................19
2.1.4.1 Enhanced Bank‟s Liquidity Position...........................................................................................20
2.1.4.2 Protection of Depositors and Creditors in Times of Failure .......................................................20
2.1.4.3 Enhanced Lending Abilities........................................................................................................21
2.1.5 Central Bank‟s (RBZ) Possible Corrective Measures of Combating Liquidity Crisis ..................21
2.1.5.1 Failure Reduction........................................................................................................................21
2.1.5.2 Adequate Capital.........................................................................................................................21
2.1.5.3 Longer Debt Maturities...............................................................................................................22
2.1.5.4 Deposit Insurance........................................................................................................................22
2.1.5.5 Borrowing and Lending in the Same Currency...........................................................................22
2.1.6 Possible Solutions to Liquidity Crisis Instated by Banks ..............................................................23
2.1.6.1 Cash Forecasting.........................................................................................................................23
2.1.6.3 Tackle the Roots of the Liquidity Crisis .....................................................................................23

Dhliwayo Takudzwa P0114070B vii
2.1.6.4 Rebuilding of Confidence and Trust in the Banking Sector .......................................................23
2.2.0 EMPIRICAL EVIDENCE.............................................................................................................24
2.2.1 Causes of Liquidity Crisis..............................................................................................................24
2.2.2 Impact of Liquidity Crisis in Economic Growth............................................................................25
2.2.3 Liquidity Risk Management Processes and Policies Adopted by Banks.......................................25
2.2.4 Impact of Capitalization on Bank Liquidity ..................................................................................26
2.2.5 Possible Solutions to Liquidity Crisis............................................................................................26
2.3 Conclusion ........................................................................................................................................27
CHAPTER THREE ................................................................................................................................28
RESEARCH METHODOLOGY............................................................................................................28
3.0 Introduction.......................................................................................................................................28
3.1 Research Design................................................................................................................................28
3.2 Study Population...............................................................................................................................28
3.3 Research Sample...............................................................................................................................29
3.4 Data Collection Methods ..................................................................................................................29
3.5. Primary Data....................................................................................................................................29
3.5.1 Questionnaires................................................................................................................................30
3.5.2 Questionnaires Justification...........................................................................................................30
3.5.3 Questionnaires Shortcomings ........................................................................................................30
3.5.4 Personal Interviews........................................................................................................................31
3.5.5 Personal Interviews Justification ...................................................................................................31
3.5.6 Personal Interviews Shortcomings.................................................................................................31
3.6 Secondary Data.................................................................................................................................32
3.7 Data Analysis....................................................................................................................................32
3.8 Conclusion ........................................................................................................................................32
CHAPTER FOUR...................................................................................................................................34
ANALYSIS, PRESENTATION AND DISCUSSION OF RESULTS...................................................34
4.0 Introduction.......................................................................................................................................34
4.1.0 Response Rates Analysis ...............................................................................................................34
4.1.1 Questionnaire Response Rate.........................................................................................................34
4.1.3 Personal Interviews Response Rates..............................................................................................35
4.2 Does Multicurrency Regime Adoption have Impact on Liquidity of Zimbabwe Banks ..................36

Dhliwayo Takudzwa P0114070B viii
4.3 Causes of Liquidity Crisis in Zimbabwean Banks............................................................................38
4.4 Liquidity Risk Management Procedures Deployed by Zimbabwean Banks.....................................41
4.5 Does Recapitalization have an Impact on the Liquidity of Zimbabwe‟s Banks ...............................42
4.6 Possible Measures that can be Instituted by RBZ and the Banking Sector in Combating Liquidity
Crisis.......................................................................................................................................................43
4.7 Conclusion ........................................................................................................................................45
CHAPTER FIVE ....................................................................................................................................47
SUMMARY OF FINDINGS, CONCLUSIONS AND...........................................................................47
RECOMMENDATIONS........................................................................................................................47
5.1 Introduction.......................................................................................................................................47
5.2 Summary...........................................................................................................................................47
5.3 Conclusions.......................................................................................................................................48
5.3.1 Does Multicurrency Regime Adoption have Impact on Liquidity of Zimbabwe Banks ...............48
5.3.2 Causes of Liquidity Crisis in Zimbabwean Banks.........................................................................48
5.3.3 Liquidity Risk Management Procedures Deployed by Zimbabwean Banks..................................48
5.3.4 Does Recapitalization have an Impact on the Liquidity of Zimbabwe‟s Banks ............................49
5.3.5 Possible Measures that can be Instituted by RBZ and the Banking Sector in Combating the
Liquidity Crisis .......................................................................................................................................49
5.4 Recommendations.............................................................................................................................50
5.5 Suggestions for Areas of Further Research.......................................................................................51
REFERENCES .......................................................................................................................................52
APPENDICES ........................................................................................................................................56
APPENDIX 1: COMMERCIAL BANKS QUESTIONAIRE................................................................57
APPENDIX 2: RESERVE BANK of ZIMBABWE QUESTIONAIRE ................................................61
APPENDIX 3: ECONOMISTS QUESTIONAIRE................................................................................63
APPENDIX 4: INTREVIEW QUESTIONS ..........................................................................................64

Dhliwayo Takudzwa P0114070B ix
LIST OF FIGURES
Figure 4.1: Distribution of Questionnaires Respondents………………………………………...35
Figure 4.2: Distribution of Interviews Respondents……………………………………………..36
Figure 4.3: Respondents on the Impact of Multicurrency Regime on Bank Liquidity………….36
Figure 4.4: Impact of Multicurrency regime adoption on banks‟ liquidity……………………...37
Figure 4.5: Causes of Banks Liquidity Challenges……………………………………………...38
Figure 4.6: NPL's Trend from 2009 to December 2014…………………………………………39
Figure 4.7: Distribution of Liquidity Challenges Causes in Zimbabwean Banks……………….40
Figure 4.8: Do Banks Deploy Liquidity Management Processes and Strategies………………..41
Figure 4.9: Respondents that say Banks deploy Liquidity Management Strategies……………..42
Figure 4.10: Impact of Recapitalization on Banks‟ Liquidity………………………………..….43

Dhliwayo Takudzwa P0114070B x
LIST OF TABLES
Table 4.1: Questionnaire Response Rates………………………………………………………34
Table 4.2 Interview Response Rates…………………………………………………………….35
Table 4.3: The New Capital Requirements……………………………………………………...44
Table 4.4: Banks Capital as at 30 September 2014…………………………………………...…45

Dhliwayo Takudzwa P0114070B xi

Dhliwayo Takudzwa P0114070B 1
CHAPTER ONE
1.0 Introduction
Multi-currency regime (dollarization) is a situation where the citizens of a country officially or
unofficially use a foreign country's currency as legal tender for conducting transactions. The
main reason for dollarization is because of greater stability in the value of the foreign currency
over domestic currency. The downside of dollarization is that the country gives up its right to
influence its own monetary policy by adjusting the money supply. The researcher will seek to
analyse and assess the impact of the multi-currency regime (dollarization) adoption in February
2009 on the liquidity crisis facing the Zimbabwean commercial banks. This chapter of the
research study, the researcher will enlighten on the background of the study, statement of the
problem, research objectives, research questions, justification of the study, scope of the study,
limitations and organization of the study.
1.1 Background to the Study
It is an undisputable fact that the banking sector plays a pivotal and indispensable role in
economic growth through the efficient allocation of resources via financial intermediation in any
economy. The intermediary role of banks in an economy can be effectively played in an
environment epitomized by adequate liquidity.
The stabilisation of the economy post multi-currency regime brought about a level economic
playing field, a welcome relief from the ravaging and tumultuous hyper-inflation at 230 million
percent. However in the contrary, the relief from hyper-inflation also came with the price of
liquidity challenges that is hounding the banking sector as a whole.
The Zimbabwean banking sector experienced an unprecedented period of stability, since the
introduction of the multicurrency regime in February 2009 (Banks & Banking Survey 2010).The
hyperinflation and subsequent adoption of the multi-currency (dollarization) regime in February
2009 which was not backed by enough foreign currency reserves virtually wiped out the capital
of banks. The value for money, assets and liabilities all vanished and the only valuable assets
banks were left with were probably buildings, vaults, technology equipment, furniture and
fittings.

The introduction of the multi-currency system has been accompanied by persistent liquidity
shortages and failures of meeting capital adequacy requirements which has seen several banks
being placed under curatorship, surrendering and cancellation of licences by the Reserve Bank of
Zimbabwe (RBZ). The banks involved include Interfin Bank (under curatorship in 2012), Royal
Bank and Genesis Investment Bank (all surrendered their bank licences in July 2012) and Trust
Bank (its licence cancelled in December 2013). This has resulted in the number of operating
banks from 27 banking institutions in December 2009 to 21 as at 31 December 2013 (Monetary
Policy 2014).
From over 5 million active bank accounts prior to dollarization, unverified reports put the
number of active accounts to less than 1 million as of 2011 (Banks & Banking Survey 2010).
Despite the total banking sector deposits, including interbank deposits gradually rising to $6.7
billion, as at December 2013, depicting a 45.5% increase from $3.05 billion as at December
2011 (The Monetary Policy 2014) and the loans to deposit ratio increased from 37.33% in June
2009 to 78.29% as at 31 December 2013, there has been a decelerating deposits throughout the
yesteryear.
As at 31 December 2013, total banking sector deposits amounted to $4.73 billion while loans and
advances were $3.70 billion. This is consistent with the economic slowdown experienced over
the period of analysis.
In a nutshell, the banking sector has remained generally stable over the years since dollarization
despite the various underlying macroeconomic challenges, but vulnerabilities in the banking
sector are continually rising amidst rising levels of non-performing loans (15.9% by December
2013), low liquidity levels (27.8% by December 2013) and rising credit risks especially in low
tier banks, has seen the RBZ intensifying the monitoring of the sector (World Bank 2014).
1.2 Statement of the Problem
The multi-currency adoption in February 2009 brought about a new platform for Zimbabwean
commercial banks to lend and to revive their other core operations, but there has been evidence
of disorderly unwinding of vulnerabilities in the Zimbabwean banking sector post multi-currency
era. Banking Halls in Zimbabwe have been characterised by long queues, queuing for their salary
deposits during the festive seasons and month ends. This has evidenced that liquidity crunch has

been hounding almost every banking institution post hyperinflation era. This resulted in RBZ
intensifying closely monitoring of the banking institutions. This has resulted in some banks
collapsing, some being placed under curatorship; and these developments have driven the motive
of this research.
1.3 Research Objectives
The objectives of the study will be split into two, namely primary and secondary objectives.
1.3.1 Primary Objectives
1. To analyse the impact of multi-currency (dollarization) regime adoption on the liquidity
challenges of Zimbabwean Banks, (a case of Bulawayo Commercial Banks (2009-2014).
1.3.2 Secondary Objectives
1. To determine the causes of liquidity crisis in the Zimbabwean banking sector.
2. To evaluate the impact of liquidity crunch on economic growth.
3. To examine the liquidity risk management procedures that are deployed by commercial
banks.
4. To ascertain the impact of capitalization on the liquidity of commercial banking institutions.
5. To determine the possible corrective measures that can be instituted by the RBZ and the
banking sector in combating liquidity crunch in Zimbabwe‟s commercial banks.
1.4 Research Questions
1. Does the multicurrency (dollarization) regime affect the liquidity crisis the banking sector in
Zimbabwe?
2. What are the causes of liquidity crunch in Zimbabwe‟s banking sector?
3. Are there liquidity risk management procedures deployed by commercial banks?
4. Does capitalization have an impact on liquidity of banking institutions?
5. What are the possible measures that can be instituted by the RBZ and the banking sector
itself in combating the liquidity crunch?

1.5 Justification of the Study
The researcher will seek to perform a post-mortem and unearth the causes of liquidity crunch
that is hounding the Zimbabwean banking sector since the adoption of the multi-currency regime
(dollarization) in February 2009, and come up with the findings with regards to liquidity
challenges which would give a detailed insight and also be helpful to the following:
The Researcher
The research will be submitted to the university in partial fulfilment of the National University of
Science and Technology (NUST) requirements so as to attain my Bachelor of Commerce
Honours Degree in Banking. The research will also give the researcher an insight of liquidity
crisis faced by Zimbabwean commercial banks
Banking Institutions
The research will be aimed at unveiling the impact of the multi-currency regime (dollarization)
on liquidity challenges they are encountering as commercial banks. Thereby it will also enlighten
the commercial banks to consider appropriate measures they can adopt with regards to the
prevailing liquidity crunch.
Bank Regulators
It is also hoped that the study will also act as a provision of directional guidelines which will
help the banking sector alertness to the Central Bank in implementing measures and strategies
that concern liquidity challenges. The research will also assist in the on-going improvement of
banks for their continued success.
Other researchers
The research will be useful to researchers who will study this field of research or any related
field to this research. That is, the study should add value to existing literature and may also be
useful as reference to other fellow scholars and researchers in this area of research.
1.6 Scope of the Study
The researcher chose Bulawayo as area under study and the aforementioned time period due to
both limited financial and time resources. The study research will seek to examine the liquidity

challenges hounding the Zimbabwean commercial banks post the adoption of the multicurrency
regime in February 2009, since it is the period were liquidity crunch hit the Zimbabwean banking
sector. The researcher is going to be visiting banks, mainly those which are situated in
Bulawayo, although their headquarters are in Harare due to financial and time constraints.
Researcher will also try to visit the Reserve Bank of Zimbabwe (Bulawayo Branch) and have
brief chat with the economists so as to gather relevant information pertaining to the study.
Because of the limited financial and time resources, the researcher will have to visit a few of the
top tier commercial banks and gather information from them about liquidity and will also visit a
few of the low tier banks, were the problems of liquidity crunch is most prominent. The research
is mainly focused on liquidity challenges experienced post dollarization that is, from 2009 to
2014.
1.7 Study Limitations
The researcher firmly anticipated difficulties in accessing some information not yet made public
by the monetary authorities for example issues pertaining to the going under of Interfin and
sketchy information available from monetary authorities about Royal and Genesis Investment
Bank. Furthermore the researcher anticipated to face challenges that would improvise the
reliability of the study in the form of:
i. Accessing information in form of questionnaires sent to banks‟ top management, RBZ, and
the economists proved difficult for the researcher to execute, given the sensitivity of the
topic to some parties mentioned therein.
ii. The time available for the research was limited since the researcher did strike a balance
between the research and other pressing college commitments.
iii. Financial constraints also limited the size of sample population consulted which negatively
impact the reliability of the research findings.
iv. This research required a lot of communication via the telephone and through the use of
email which was not always as effective personal interviews because the majority of the
financial institutions Head Offices are located in Harare, which was far from the place of
study thereby limiting the availability of the information needed by the researcher.

1.9 Organisation of the Study
The foundation for the entire research project has been constructed in this chapter. This chapter
has presented the research problem, various research questions, scope and justification of the
study has also been explained and explored. The remainder of the project is structured as
follows:
The second chapter outlines both theoretical and empirical evidence of the study. It gives
different opinions from different authors pertaining to the subject in question. The chapter gives
an in depth analysis of the bank and non-specific bank factors that lead to bank failures from
related literature available.
Chapter three will outline the research methodology that was used in the study to obtain all the
results from the study. This chapter shows in detail the tools that were used for gathering all the
data necessary for the research and how it was conducted generally.
The fourth chapter shows all the data that was gathered in the third chapter in form of tables,
charts and bar graphs for analysis purposes that is generally data presentation and analysis.
Finally, the last chapter gives research findings, conclusion on all the findings that were obtained
and possible recommendations for banks.
In summary the paper is organised as follows: the next section discusses pertinent literature on
the subject matter. This is followed by a discussion of the methods which were employed in
conducting the study. Results are then presented and discussed. The paper ends by drawing
conclusions.

CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter involves an analysis of authorial literature and evidence with regards to the impact
of multi-currency (dollarization) on commercial bank liquidity challenges. In this chapter there
is a review of theoretical and empirical literatures by authors from various sources, textbooks,
published journals and articles from the internet and the like. The roots of liquidity crunches, the
impact of it on economic growth, concepts involved in the process of liquidity management, the
pillars of bank liquidity management are explored. Though every effort has been made to
broaden the literature and material, it is by no means exhaustive.
2.1.0 THEORETICAL LITERATURE
2.1.1 Causes of the Liquidity Challenges
Driessen (2010), alluded that liquidity crisis refers to institutions‟ inability to fund increases in
assets and meet obligations as they come due, without incurring high losses. Borio (2009) also
defined liquidity crisis as the sudden and prolonged evaporation of both market and funding
liquidity, with potentially serious consequences for the stability of the financial system and the
real economy. Williamson (2008), viewed liquidity crisis as the hindered flows of funds among
the agents of the financial system, with a particular focus on the flows among the central bank,
commercial banks and markets.
2.1.1.1 Bank Runs
Diamond-Dubvig model (1993) viewed liquidity crisis on banks may come as a result of bank-
run. A bank-run may occur because banks assets, which are liquid but risky, no longer cover the
nominal fixed liability (demand deposits) and depositors therefore withdraw quickly to minimize
their potential losses. Allen and Gale (2000), bank runs change fundamentals, as there will be
excess demand for liquidity.

De Grauwe (2008) argued that if depositors are gripped by a collective movement of distrust and
decide to withdraw their deposits at the same time, banks are unable to satisfy these withdrawals
as their assets are silliquid. Hence a liquidity crisis erupts in that banking institution.
A “run on the bank” can kill even sound financial institutions if they cannot readily find the cash
to cover short-term demands. Further, scrambling to find cash can force some players to sell
assets at distressed prices and this, in turn, may trigger liquidity challenges, insolvencies and
even failures at worst case scenarios (Brookings Business and Public Policy, 2014)
Taylor (2009) also viewed that insolvency and bank runs can be the roots of illiquidity in a
financial system. The transformation of deposits to loan reduces liquidity in the financial system
and also it potentially milks part of the liquidity from the rest of the system. Banks will be
holding illiquid assets to maturity, thus it will result in the reduction of liquidity that would be
availed to other banks, if one bank defaults (through a contagion effect). This is because banks
have deposits with each other.
2.1.1.2 Competition
Smith (2008) argues that competition can be a driving force of liquidity crisis. The link between
competition and liquidity crisis is mainly expressed through the interbank market. The degree of
competition in the banking sector can affect hedging decisions, both in terms of overall liquidity
provisioning and in terms of dispersion of hedging strategies. Banks may compete more
aggressively ex ante, so as to lock in a large number of customers, whose future liquidity needs
constitute future income. Higher competition tends to increase the volume of capital dedicated to
illiquid loans. This mechanically reduces the optimal share of liquid assets (Banque de France,
2008).
Banque de France (2008) further argued that through this negative effect, competition tends to
worsen the risk profile of the pool of liquidity applicants. Banks that are short of liquidity make
fewer monitoring efforts as they reinvest less of their own liquidity in risky projects. If the risk
profile of the pool of liquidity applicants continues to deteriorate, banks with excess liquidity
may prefer to hoard their liquidity with the central bank, than to lend it in the interbank market.
Some banks may be reluctant to lend short term liquidity in order to restore their own marketing

power by weakening their competitors. Thus competition may participate in creating the
preconditions of a liquidity crisis.
2.1.1.3 Financial Liberalization
Kaminsky and Schmukler (2003) defined financial liberalization as the deregulation of the
foreign sector capital account, the domestic financial sector, and the stock market sector viewed
separately from the domestic financial sector.
Saunders and Cornett (2003) postulated that most of banking crisis emanates from financial
liberalization. Both casual observation and formal econometric work suggest the existence of
important links between financial liberalization and financial crisis. Lowering reserve
requirements on banks is another common liberalization move. The rationale is to improve
efficiency of financial intermediation.
However, lower reserve requirements increases banks vulnerability to bank runs. Another
liberalization move is to lower barriers to entry into the banking sector, either by domestic or
foreign banks. This move is meant to increase competition and efficiency in the banking sector.
However Calomiris and Mason (2000) argued that competition results in greater risk taking by
banks. Demirguc-Kunt and Detragiach (2002) also suggested that in most cases, fewer and
monopolistic banks are less prone to bank runs and crisis as compared to those in a competitive
financial system.
2.1.1.4 Moral Hazard
De Grauwe (2008), viewed moral hazard as when agents who are insured will tend to take fewer
precautions to avoid the risk against which they are insured. The insurance provided by central
banks and governments in the form of lender-of-last-resort and deposit insurance gives financial
institutions strong incentives to take more risks.
If banks anticipate generous support from the Lender of Last Resort (LLR) during a crisis, they
are likely to undertake lower precautions against a crisis and imprudent liquidity management
practices. Mishkin (2006) argued that when bank management, starts operating for their own
benefit, and not for the benefit of shareholder, it becomes a problem.

Connected lending is a practice, where loans are given to owners of financial institutions,
relatives, managers and friends. Banks are less likely to affectively monitor loans given to
familiar people, which may encourage borrowers to take on risks they would not otherwise take.
This is known as moral hazard and has adverse outcomes as it brings more losses to banks
(Mishkin 2006).
2.1.1.5 Poor Asset Quality Assessment
Barrell et al (2009) stated that the main activity of bank management is not deposit mobilization
and giving credit. Effective credit administration reduces the risk of customer default. The
competitive advantage of a bank is dependent on its capability to handle credit risk valuably.
Improper or poor asset quality assessment lead to bad loans which in turn results in banking
institutions experiencing liquidity problems as they failing to match their assets and liabilities
and even bank failure at worse case scenarios.
Glass, Davidson, and Blumberg, (2009), noted that the liquidity challenges of a bank mainly
emanates from the mismanagement because of bad lending decisions made with respect to wrong
appraisal of credit status, or the repayment of non-performing credits and excessive focus on
giving loans to certain customers. Bessis et al (2010) also stated that poor credit control, which
results in undue credit risk, causes bank failure.
2.1.1.6 Non-Performing Loans (NPLs)
Bratavonic (2003) defined a non-performing loan as sum of borrowed money upon which the
borrower has not made his or her scheduled payments in for at least 90 days. A non-performing
loan is either in default or close to being in default. In other words a loan is non-performing, the
odds that it will be repaid in full are considered to be substantially lower.
Chikoko, Mutambanadzo, and Vhimisai (2012) also viewed a non-performing loan as an advance
by a financial institution that is not earning income and full payment of principal and its interest
income is no longer anticipated. The literature that examines non-performing loans has
increased as more researchers attempt to understand the major factors that cause instability.
This trend has arisen due to the strong association between non- performing loans and
banking crisis.

Sanderson Abel (2014) postulated that if a bank‟s amount of disposal of non-performing loans
continues to exceed their profits, it will result in reduction of bank net worth and lower their risk-
taking capacity, making it difficult to invest funds in risky projects and realize potentially
productive businesses. In this manner, the problem of non-performing loans lowers the bank‟s
liquidity position hence consequently it will encounter liquidity challenges.
Recent research study of Kerman (2005), unearthed that the banking crises (due to liquidity
challenges) in Eastern Asia and part of Sub-Saharan African countries were preceded by a level
of high non-performing loans.
2.1.1.7 Maturity Mismatches
Mismatches refer to the inability by banks to match their assets to their liabilities. Commercial
banks that engage in insider lending and poor corporate governance, will likely experience bank
failures (Rajan and Graham, 2001). They pointed out that liquidity crisis can result from maturity
mismatches that they reflect the outcome of self-interested optimizing behavior by commercial
banks.
Hiroyuku (2009) alludes that maturity mismatches covers the behavior of banks assets and
liabilities cash flows where there is some (real or perceived) problem with a bank, including
operational problems, doubts about the solvency of a bank or adverse ratings changes. It would
represent a “worst case” for a bank. A bank that fails to telepath the behavior of its assets and
liabilities under scenarios is prone to liquidity challenges overtime.
2.1.1.8 Absence of a Functional Lender of Last Resort Role
Lender of Last Resort (LLR) is an institution, usually a country's central bank, which offers loans
to banks or other eligible financial institutions that are experiencing financial difficulty or are
considered highly risky or near collapse.
Calomiris and Kohn (2014) postulated that a key role of central banks is to be a “lender of last
resort” in times of crisis to prevent liquidity problems from triggering a full-fledged financial
crisis. A resilient financial system needs rules to ensure financial institutions maintain adequate
liquidity and that the central banks provide a backstop for crisis situations.

However like any other policy, the Lender of Last Resort role has its own shortcomings too. De
Grauwe (2008) argued that the inception of this role by central banks leads to moral hazard in the
banking sector. The insurance provided by central banks and governments in the form of lender-
of-last-resort and deposit insurance gives bankers strong incentives to take more risks and leads
to growth of banking malpractices which in turn results in liquidity crisis.
2.1.1.9 Diminished or Low Customer Banker Relationship
Chijoriga et al (2008) alludes that the banking business is about confidence with the financial
institutions, thus, for bank customer relationship to exist, confidence in the banking industry
should prevail first. A marginal loss of confidence, instantaneously results in the diminished
banker customer relationship withholding other forces at play. And consequently diminished
relationships results in a financial institution experiencing severe bank runs as aforementioned
above, hence bank crisis and the liquidity challenges looms within the bank.
Smith and Ongena (2002,) also added that a good banker customer relationship is an essential
asset in banking business and a sudden loss of it leads to banking crises, which often force banks
into bankruptcy and encounter liquidity challenges.
2.1.2 Impact of Liquidity Crisis on Economic Growth
It is an undisputable fact that the banking sector plays a pivotal and indispensable role in
economic growth through the efficient allocation of resources via financial intermediation in any
economy by channelling funds from surplus units to deficit units (Gono, 2012). The intermediary
role of banks in an economy can be effectively played in an environment epitomized by adequate
liquidity.
Adebayo et al (2011) argued that liquidity management is an important aspect of monetary
policy implementation, while the other integral component of monetary policy, that is, economic
management, involves promoting sustainable economic growth over the long term by keeping
monetary and credit expansion in step with an economy‟s non-inflationary output potential,
liquidity or reserve management as a shorter time horizon. In order to maintain relative macro-
economic stability, reliance is placed on liquidity management to even out the swings in liquidity
growth in the banking system hence resulting in the growth of the economy as whole.

2.1.2.1 The Credit Crunch Hypothesis
Demirgüc-Kunt and Detragiache (2005) argued that liquidity crisis in an economy can result in
credit crunch. During banking crises, banks may decrease credit to firms which in turn lower
expenditure and investment in an economy. This decrease lowers consumption, aggregate
demand and employment and possibly drives firms into illiquidity. These implications suggest
that distressed banks hinder the growth rate of the economy
Demirgüc-Kunt and Detragiache (2005) postulated that banking crises increase agency problems
and lending relationships become more complicated as banks may abandon risky borrowers or
raise spreads. Output and bank credit may decline during banking. However, inflation and
exchange rate effects may mix up credit valuations as well as credit restructurings with off-
balance sheet vehicles, thus appearing as a deeper decline of credit than in reality.
Rajan, Detragiache and Dell„Ariccia (2008) observe that more financially dependent sectors
indeed lose about percentage point of growth more in each crisis year, compared to industries
that are less dependent on external finance. This effect becomes even stronger in developing
countries where private sectors may have less access to foreign capital, thus amplifying the credit
crunch.
2.1.2.2 Diminished or Reduced Consumer Confidence
Liquidity is largely about confidence. A sudden loss of confidence, whether rational or irrational
will result in liquidity difficulties. Smith and Ongena (2002) sum it all up, that the right
relationship is everything. Banking crises often force banks into bankruptcy. Mergers or
downsizing result in the loss of valuable bank-to-customer relationships and knowledge is lost.
Arestis, Demetriades, Panicos and Luintel (2001) postulated that many bank employees, credit
officers and bank managers might have changed departments, banks or the industry as a
consequence of mergers or downsizing. Banks are providers of liquidity by granting loans and
are supposed to lean against the wind to accommodating debtors during difficult times. Hence,
valuable bank relationship, bank services and information get lost during banking crises.

2.1.2.3 Information Costs
Ratnovski (2013) says a new bank relationship requires the new bank to accumulate information
which comes at a cost. Bank crisis can create deadweight costs as the loss of customers can
damage the reputation of the bank, thus it decreases future borrowing ability (de Lange, 2002).
Soludo (2009) and Aluko (2008) also argued that a decrease in the bank„s market value upon
announcement of its closure. Besides bank defaults, dispositions of failed or failing banks or
voluntary bank mergers will cause temporary disruptions in banking services (Jiangli, Unal and
Yom, 2006).
2.1.2.4 Limited Long-term Credit Lines
The Global Outlook (2009) alludes that liquidity constrained banking sector might hinder
economic activity as banks reduce credit. This may result in firm closures, reduced consumption,
lower aggregate demand and higher unemployment. Calomiris, Kinglebiel and Laeven (2004),
however, argue that the correlation between bank credit and economic activity can also reflect
expectations of poor conditions which may reduce the demand for loans. Some authors find only
a weak relationship between bank deposits and banking crises.
2.1.2.5 Output Losses
Acaravci, Ozturk and Acaravci (2007) alluded that the ultimate cost of a financial crisis is the
reduction in welfare it imposes on consumers of the current, and any subsequent generation that
may bear the costs. The output foregone, when there is a crisis is another possible indicator of its
cost. Kremers (2006) also observed that this measure synthesizes both the loss of consumption of
the current generation, and the reduction in investment and or wealth of the next generation.
2.1.3 Liquidity Risk Management Procedures and Policies adopted by Banks
Ratnovski (2012) says liquidity risk management is a key banking function and an integral part
of the asset and liability management process. The fundamental role of banks is the maturity
transformation of short-term deposits (liabilities) into long-term loans (assets) making banks
inherently vulnerable to liquidity risk. Borio (2009) defined liquidity risk management refers as
the management of mismatches on the balance sheet with available liquidity be it internal or
external. He also went on to view banking liquidity represents the capacity of a bank to finance

its transactions efficiently. Failure in liquidity risk management may result in a bank becoming
unable to meet its obligations.
2.1.3.1 Transparency
Leuz et al (2003) and Doidge et al (2009) say a bank can adopt transparency. Transparency is an
ex-ante decision that enables a more effective communication of bank asset values to outsiders.
In case of a negative signal, a transparent solvent bank, can communicate its solvency to
investors and obtain funding. If the bank is still unable to “prove” solvency and it cannot obtain
refinancing. Even for a bank that has put in place all the necessary preconditions, the
communication may sometimes be ineffective, and then the refinancing will not be forthcoming
(Ratnovski, 2012).
2.1.3.2 The Cash-Flow Constraint
Horne and Wachowicz (2000) say liquidity risk arises because inflows and outlays are not
synchronised. The timing of cash inflows and outflows is the crucial driver of funding liquidity
risk. A bank is liquid if it is able to settle all obligations with immediacy (Drehmann and
Nikolaou, 2012). In every period, if cash outflows are smaller than cash inflows, the bank will be
able to meet its short term obligations as they fall due.
2.1.3.3 Liquidity Management Policies Instated by Banks
Sarr and Lybek (2002) say liquidity management, is considered from the perspective of working
capital management. Managing liquidity can be challenging primarily because the underlying
factors that drive exposures can be dynamic and unpredictable. Although measurement
techniques differ from bank to bank, there are some common liquidity measures including
liquidity ratios, cash flow gaps and market liquidity measures such as, bid and ask spread and
turnover ratio.
Subhanij (2010) postulated that liquidity ratios convey a banks position by measuring items on
the balance sheet, income statement and statement of cash flows to determine sufficiency of
resources. Cash flow gaps focus on estimated cash inflows and outflows over horizons to
determine surpluses or deficits.

2.1.3.4 Analysis of Liquid Assets
Glass, Davidson, and Blumberg (2009) argue that liquidity management policies are mainly to
do with the management of the investments and capital portfolios of the banks. This is done
under direction of Asset Liabilities Committee (ALCO). The policies ensure that banks
maximize the revenue generating possibilities of the local and foreign exchange markets, ensure
that interest rate and foreign exchange rate risk is in line with market risk mandate as delegated
by local and group ALCO and also ensuring that the bank is adequately funded at reasonable
cost.
2.1.3.5 Liquidity Management Strategies
2.1.3.5.1 Contingency Liquidity Planning
Tembo (2013) postulated that a bank should put in place a formal liquidity plan approved by its
board of directors for dealing with major liquidity problems. The plan should outline course of
action for alternative assets and liabilities strategies e.g. plans to market more aggressively, raise
deposits etc. Liquidity management is usually delegated to ALCO.ALCO is responsible for
coming up with appropriate strategies to manage the bank`s mix of assets and liabilities.
Brevoort and Wolken (2009) also observed that the contingency funding plan outlines a list of
potential risk factors, key reports and metrics that are reviewed on an on-going basis to assist in
assessing the severity of, and managing through, a liquidity crisis and or market dislocation.
Carlson (2004) also added that the contingency funding plan also describes in detail the bank‟s
potential responses if the assessments indicate that the firm has entered a liquidity crisis, which
include funding the potential cash and collateral needs as well as utilizing secondary sources of
liquidity.
2.1.3.5.2 Limits on Maturity Mismatches
Tembo (2013) alluded that banking institutions should always place limits on the cumulative
funding position. Control over maturity mismatches for the next five business days should
receive particular attention. Landier, Sraer, and Thesmar (2013) argued that banks that set
maturity mismatches an on average normally experiences increased profits overtime as it results
in a bank operates with a positive maturity mismatches, thus its assets have longer maturities and
reprice less frequently than its liabilities, hence less prone to liquidity challenges.

The Financial Stability Forum (2009) called for banks to consider a joint research programs to
measure funding and liquidity risk attached to maturity transformation, enabling the pricing of
liquidity risk in the financial system and it also recommended that the Bank of International
Settlement (BIS) and International Monetary Fund (IMF) to avail to authorities all the
information on leverage and maturity mismatches on a system-wide basis.
2.1.3.5.3 Maintaining Stock of Liquid Assets
Gulde, Nascimento and Zamalloa (2001) defined liquid asset stock as the obligation of
commercial banks to maintain a predetermined percentage of total deposits and certain liabilities
in the form of liquid assets. Adequately designed stocks of liquid assets have merits in less
banking systems or when used flexibly as indicators in conjunction with other liquidity
measures, moreover it can make the banks more resilient in the contexts in which the monetary
authority has limited lender-of-last-resort capabilities.
Tembo (2013) observed that it‟s important for banks to ensure adequate stock of liquid assets in
order to meet unforeseen future demand. A high stock of liquid assets provides the bank with
flexibility in its balance sheet management. An adequate stock of high quality liquid assets can
provide a bank with the capacity to meet its obligations while any underlying problems affecting
liquidity are addressed. Glass, Davidson, and Blumberg (2009), postulated that a bank‟s liquidity
policy should clearly identify such assets, define their role and establish minimum holdings.
Maintaining a stock of high quality liquid assets lowers the likelihood of a bank needing to
undertake an urgent sale of illiquid assets. It also reduces a bank‟s reliance on liability
management which can result in the purchase of liabilities at a higher cost than is sustainable
over the medium term.
However he also noted that without liquid assets, a bank would be forced to borrow at expensive
rates or access funds from the central bank, which comes at a penalty, that is, high interest rates.
Noscimento (2001) also added that the maintenance of liquid assets stocks can mostly efficiently
accomplished in an economy stable macroeconomic environment in the context of sound fiscal
policy and if necessary in a broad financial sector reform package.

2.1.3.5.4 Diversification of Liabilities
Diamond and Rajan (2001) postulated that as part of its liquidity management strategies, a bank
should seek to maintain a diversified and stable funding base and establish strong and lasting
relationships with depositors and other liability holders. Sundararajan and Balino (2011) also
discussed about banks liability diversification and volatility. They alluded that a bank with a
widely diversified, stable funding base is less exposed to changes in the perceptions of a narrow
group of depositors.
The ECB (2012) also recommended that banks should establish a policy regarding concentration
of sources of funding so as to avoid an excessive reliance on anyone counterparty (including
relateds) or any one product or funding market. It should also undertake regular statistical and
behavioural analysis of its liabilities, for instance to detect any signs that the bank‟s deposit base
was becoming more volatile.
2.1.3.5.5 Intra-Group Liquidity
Mukesh and Khanal 2011) say that a bank‟s liquidity management strategies should address any
regulatory or legal impediments to accessing liquidity on a group basis. Excess liquidity in
subsidiaries and overseas branches may not be readily available to the bank or other subsidiaries
when needed.
They further went on to say where a bank decentralises or partially delegates‟ liquidity
management amongst operating units, it should clearly document the policies and limits
established for those units as well as any internal liquidity support arrangements provided to
those units. It should address how the liquidity of these units is monitored and controlled by head
office management in that country.
The Committee of European Banking Supervisors (CEBS, 2008) also postulated that where a
locally-incorporated bank provides significant funding and other liquidity support to subsidiaries
and associates, the regulatory authorities should be satisfied that such support is appropriately
captured in the measurement of its liquidity position and may require a bank to place limits on
such support.
The CEBS also stated that the branches and subsidiaries of foreign banks may have lines of
liquidity support available to them from an overseas parent (or associates). This support would

be of particular value in the event of a crisis affecting only local operations, but could prove
ineffective in the event of a crisis impinging upon the group as a whole. Foreign bank
subsidiaries are expected to manage their liquidity in their own right. It may, however, be
appropriate to look at the liquidity of foreign bank branches in a global context.
2.1.3.5.6 Foreign Currency and Other Markets
Ratnoviski (2013) observed that bank which is actively involved in multiple currencies and/or
where positions in specific foreign currencies are significant to its business, its liquidity policy
should address the measurement and management of liquidity in these individual currencies. For
instance, a bank needs to assess the convertibility of individual, the timing of access to funds,
and the impact of potential disruptions to foreign exchange markets, and exchange risks before
presuming that surplus liquidity in one currency can be used to meet a shortfall in another
currency.
Sigauke, Maposa and Chagwiza (2012) added that bank‟ s liquidity policy statement should
include a back-up liquidity strategy for circumstances in which its normal access to funding in
individual foreign currencies is disrupted. Similarly, where a bank is active in securities and
other markets it needs to have regard to the impact on its liquidity management of disruptions in
those markets.
2.1.4 Impact of Capitalization on Banks Liquidity
Federal Reserve Bank of Illinois (2003) defined banks capitalization as the re-adjustments of the
cushion that protects banks and their customers and shareholders from potential losses emanating
from the assumption of risks in the banking business.
Pandey (2005), postulated that capital is needed to support business so therefore, the importance
of adequate capital in banking cannot be overemphasized. Capital is an important element which
enhances confidence and permits a bank to get involve or engage in banking. A very important
function of capital in a bank is to serve as a means of absorbing losses and curbing of liquidity
risk. Capital serves as a buffer between operating losses and being unable to settle its short-term
obligations when they fall due (liquidity) and even paying its debt (insolvency).
Drehmann and Nikolaou (2012) also correctly observed, the more capital a bank has, the more
losses it can sustain without running into bankruptcy. Capital thus, provides the measure for the

time a bank has to correct for lapses, internal weakness or negative developments. The larger
size and capital a bank has, the longer the time the bank has before being exposed to liquidity
risk and incurring losses that will completely erode its capital.
Jagtiani et al (2000), argue that under or inadequately capitalized banking institutions are
exposed to liquidity challenges and liquidity risk, thus the lower the bank‟s capital, the higher the
probability of it being prone to liquidity crises. Goodhart et al, (2002) agreed with this statement
and added that as bank‟s capital decreases, the higher the motivation for actions to combat the
looming liquidity problem.
However the research studies of Glass, Adam Davidson, and Alex Blumberg, (2009) have
suggested that recapitalization of banks has its own counter effects. In general, management
tends to offset increases in capital with increases in liquidity risk, but also these tradeoffs are
significantly affected by regulatory pressure. In particular, regulatory pressure, as reflected in the
new liquidity risk-based bank capital requirements seems to have been effective in offsetting
tendencies for banks with low capital to increase their risk taking and to engage in moral hazard
behavior.
2.1.4.1 Enhanced Bank’s Liquidity Position
Demirgüc-Kunt and Detragiache (2005) suggest that the larger the liquidity of a bank, the less
the bank is exposed to risk. The difficulty, however is that little skill is rewarded with return in
line with observation in finance theory of positive linear relationship between liquidity risk and
return. Thus while inadequate liquidity will destroy a bank‟s reputation, excess liquidity will
retard earnings. In view of its significance, the regulatory authorities consider capital adequacy a
primary index to monitor bank. The traditional measures of capital adequacy ratio are ratio of
equity funds to risky assets and ratio of capital funds to risk assets (De Serres et al, 2006).
2.1.4.2 Protection of Depositors and Creditors in Times of Failure
Recapitalization strengthens the banking system and ensures a diversified, strong and reliable
banking sector which will guarantee safety of depositors‟ money and shareholders‟ funds play
active developmental roles in an economy and global financial market (Soludo, 2004).

2.1.4.3 Enhanced Lending Abilities
Bank capitalization may also influence the way lending supply reacts to output shocks. Calomiris
and Mason (2000), postulated that bank capitalization is linked to risk taking behavior and then
to banks portfolio choices. It means that lending of banks reacts to the degree of capitalization.
Adequate bank capitalization results in the improvement in a bank‟s overall liquidity position
and the lending ability, and thus through channeling funds (by lending) to real or the productive
sectors of the economy and through multiplier effect, hence it results in the economic growth and
development (Acaravci, Ozturk and Acaravci 2007). Various empirical studies conducted
revealed that recapitalization of banks gingers and revives the economy. Banks have pivotal roles
in an economy and are the main drivers of economic activity by playing the financial
intermediation role.
2.1.5 Central Bank’s (RBZ) Possible Corrective Measures of Combating Liquidity
Crisis
2.1.5.1 Failure Reduction
Davies (2003) says that failure is an inherent, competitive, innovative part of the capitalist
system. Eliminating the possibility of failure will distort incentives, and in effect penalise
success. A regulator should not attempt to reduce the number of failures, or deal properly with
their consequences. The Financial Service Authority (FSA) 2014 devoted considerable
supervisory resources, to attempt to reduce the number of failures, and to mitigating the
consequences of failure when it occurs. There are four principal tools that are used for failure
reduction, which are international market surveillance, market discipline, corporate governance
and prudential supervision.
2.1.5.2 Adequate Capital
Goodhart (2008), points out that, prevention of market failures could be made in favour of
stronger capital base than liquidity requirements. It is not clear that bigger liquidity cushions
would help in times of a crisis, as the potential demand for liquidity is almost infinite in those
circumstances. However a stronger capital base can save banks from a full blown crisis, as the
capital will absorb the loss. Apart from strengthening liquidity cushions, it may appear

appropriate to limit the probability of liquidity shortages incurring in the future (Banque de
France, 2008).
Berger and Bowman (2009) observed that adequately capitalized banks that are well managed
are better able to withstand losses and provide credit to consumers and businesses alike
throughout the business cycle including during downturns. Adequate capital therefore, helps
banks to absorb liquidity challenges and also to promote confidence in the banking system.
2.1.5.3 Longer Debt Maturities
The European Central Bank (ECB, 2004) and Bindseil (2005) viewed that given that short term
debt is a potential cause for liquidity problems, there may be a case for policies that lengthen the
maturity of that debt. Brunnemeier and Pedersen (2007) and Strahan (2008) estimated that a shift
towards longer foreign debt maturities is precisely what is needed. The key to abate liquidity
crisis is to avoid the real costs associated with it, which are liquidation and others (imposed by
earlier repayment of loans). Hence, a simple suspension of payments preserves the creditors‟
present value and makes everyone better off.
2.1.5.4 Deposit Insurance
Vento and Ganga (2009) say that if domestic deposits were guaranteed by government,
depositors would not run on commercial banks. Deposit insurance funds may indeed eliminate
crises, provided they are of sufficient size. Insurance funds must be kept in liquid form, an
insurance fund large enough, would eliminate the possibility of runs. Duffie and Singleson
(2003) also argue that the insurance fund must be large enough to cover a generalized banking
panic, not only bank specific risk.
2.1.5.5 Borrowing and Lending in the Same Currency
Anas and Mounira (2008) alluded that forcing domestic banks to borrow in dollars and lend in
dollars, is a popular way to minimize risk. One possibility is to restrict domestic banks to only
borrow from domestic lenders. This works if national savings are high and domestic market
capital is deep. Lynch (2007) observed that poor capital economies still need to maintain current
accounts and import capital from abroad. An alternative is to encourage foreign lenders to lend in
domestic currency, and hence share with the local borrowers, some exchange rate risk.

2.1.6 Possible Solutions to Liquidity Crisis Instated by Banks
2.1.6.1 Cash Forecasting
Benson (2008) says that cash forecasting can be facilitated if some of the peripheral cash related
processes are automated. While big companies are using more and more integrated systems and
implementing solutions like e-invoicing and supply chain financing, simple tools such as online
bank statements can also help forecast cash. Management accounting techniques such as Activity
Based Costing (ABC) can also be helpful to cash forecasting model.
ECB (2004) argued that implementing rolling cash forecasts is an evolving process. Getting the
forecast right on the first attempt is less important than initiating a baseline and continuing to
apply improvements in both accuracy and user effectiveness. Cash forecasting can help curb a
liquidity crisis, by planning your cash resources ahead, and preparing for future deficits.
Liquidity risk is said to be assassin of banks. This risk can adversely affect both bank‟s earnings
and the capital. Therefore, it becomes the top priority of a bank‟s management to ensure the
availability of sufficient funds to meet future demands of providers and borrowers by practicing
cash forecasting regularly (Fiscal Policy Research Institute, 2011).
2.1.6.3 Tackle the Roots of the Liquidity Crisis
Kremers (2006) says that normally, a liquidity crisis is only the last symptom of pre-existing root
issues such as strategic or profitability crises such as losing one key customer contract,
misalignment of product portfolio and market, accompany overstretching itself by entering too
many markets. Ferguson et al (2007) also postulated that liquidity crisis needs to be addressed
right away, but ignoring the crisis‟ root causes will merely postpone the next liquidity crisis. In
these times of urgency, the support of external advisers can bring highly needed extra resources,
experience of crisis management, and an independent perspective.
2.1.6.4 Rebuilding of Confidence and Trust in the Banking Sector
Kremers (2006) says that regaining the trust of banks, shareholders, and other stakeholders is a
prerequisite to maintaining, or raising external funding. This requires communicating robust and
realistic plans, delivering on these plans and building relationships. Strahan (2008) observed that
the main tool for trust building is a bullet-proof rolling liquidity forecast on which you will

deliver in a liquidity crisis, a company‟s usual banking relationship can be replaced by a workout
banker with different expectations and greater experience of liquidity crises.
2.2.0 EMPIRICAL EVIDENCE
2.2.1 Causes of Liquidity Crisis
2.2.1.1 Case Study: Rwanda
Sanya, Mitchell and Kantengwa (2012) say that in late 2008, a number of factors caused a
reversal in Rwanda‟s liquidity situation and plunged the banking system into a liquidity crisis
that lasted for a few months. The longstanding liquidity surplus on banks‟ balance sheet
combined with high economic growth and inflation in the first half of 2008, fuelled credit
expansion. The sharp increase in credit growth also occurred within the context of the National
Bank of Rwanda‟s (NBR) increased capital requirements from RwF 5 billion to RwF 15 billion.
Compliance with this new regulation, mainly through mergers, and acquisitions by foreign banks
increased competition and led to more aggressive lending by banks as they attempted to gain
market share. Concurrently, low real interest rates encouraged some wholesale depositors to seek
better returns from the banking system leading to the significant reduction in systemic liquidity.
The high credit growth in 2008 combined with lower deposit growth, led to short-term liquidity
problem and some banks under stress accessed the National Bank of Rwanda‟s lender-of last
resort facilities.
2.2.1.2 Case Study: Russia
Vedev (2008) says over the past three years, the Russian banking system has become “over
borrowed”, that is the ratio of loans to the non-financial sector to domestic deposits increased
from 95% at the beginning of 2004 to 120% at the beginning of 2008. Although liquidity
remained at an acceptable level, investment in securities fell from 11.5% to7.5% of assets during
the same period. The reasons are that there is a deficit of low-risk highly liquid financial
instruments and their real yield is negative.
This has resulted in unreasonably high growth in lending, segmentation of the interbank market,
and rising interest rates, raising the likelihood of bankruptcy for certain banks and threatening
destabilization of the entire banking system. The shrinking of banking liquidity to a potentially
dangerous level again underscores systemic problems in the banking system, i.e. alack of internal

resources and proper risk management to ensure economic growth and maintain financial
stability.
2.2.2 Impact of Liquidity Crisis in Economic Growth
Sanya, Mitchell and Kantengwa (2012) say that the liquidity crisis and the fast deteriorating
external environment of Rwanda have significantly impacted the real economy. Private sector
credit growth collapsed from over 70 percent in 2008 to6 percent in 2009. This was a
contributing factor to the decline in real GDP growth from11.2 percent in 2008 to 4.2 percent in
2009.
2.2.3 Liquidity Risk Management Processes and Policies Adopted by Banks
2.2.2.1 Case study: Nigeria
Olayiniet.al (2011) argued that liquidity management in Nigerian commercial banks surrounds
both sides of the prospective needs for liquidity at any giving time. Liquidity is measured as a
stock or as a flow. Liquidity management requires an appraisal of holdings of assets that may be
turned into cash with expected liquidity needs. The flow concept views liquidity not only as the
ability to convert liquid to assets into cash but also the ability of the economic units to borrow
and generate cash from operators. Financial ratios used in Nigeria, such as liquidity ratios. The
liquidity ratios are composed of current ratio, quick ratio, and liquid assets to total deposits;
loans and advances to deposits.
Sanya, Mitchell and Kantengwa (2012) say that Rwanda‟s liquidity crises occurred in a relative
regulatory vacuum as the Central Bank Act of 2005 did not have an explicit regulation on
commercial banks‟ liquidity management. Rather, the NBR‟s liquidity risk for off-site
supervision was conducted within a broad risk assessment framework called the CAMELS rating
system. Under this system, banks were obliged to comply with one indicator of liquidity - the
liquid assets to liquid liabilities ratio which had a threshold of 80%. Over the 4-year period our
estimates show banks would have encountered difficulties in respecting the liquidity requirement
since the ratio remained below the threshold minimum. The recent crisis illustrated how quickly
and severely liquidity problems can materialize as sources of funding evaporate and highlighted
the need for a liquidity risk management framework. In October 2009 the NBR introduced a new

regulation, Regulation No 10/2009on commercial banks‟ liquidity management, which amends
and sets out the parameters for liquidity regulation and supervision.
2.2.4 Impact of Capitalization on Bank Liquidity
2.2.4.1 Case Study: Indonesia
Keeley (1990); Laeven and Levine (2009) findings from leveraging unique bank-level
population data from Indonesia over the Asian financial crisis, including formal information
regarding selection criteria into recapitalization, difference-in-differences estimates suggest that
recapitalization increases lending (and more so for larger banks), while simultaneously
increasing bank risk in the long term. Results remain robust to consideration of cross-sectional
differences between banks (political connections, business group affiliation, ownership type),
and time trends (changes in macroeconomic conditions, capital requirements, accounting
regulations, and public credit registry coverage).
Altogether, the results suggest that while bank recapitalization is typically implemented as a
short term solution to banking sector stability, unintended consequences in terms of overall bank
risk may also persist in the long run. The Indonesian government implemented recapitalization
programs inorder to stabilize the banking sector and stimulate lending by providing solvency
assistance to banks with emergency capital. By ensuring that banks are able to lend, these
programs are typically constructed with the aim of containing crises to the banking sector,
thereby minimizing the negative real growth impacts that transmission to real side sector may
cause (Calomiris et al., 2004).
2.2.5 Possible Solutions to Liquidity Crisis
2.2.5.1 Case Study: Nepalese Banking Sector
Khanal (2011) says for the short term, the NRB should use all its tools to increase liquidity so
that anxious depositors are calmed down. The Nepali banking industry has to go back to
oligopoly, which is characterized by few banks but many depositors and borrowers market
structure, if things are to get normal. Few but strong BFIs with tight supervision would lead to
reduction in operating expenses, healthy competition, economics of scale and innovation in the
banking industry. For a long term solution, Nepal should have something like a “Troubled BFI

Relief Program”, to rescue and restructure troubled BFIs. It would consolidate the banking
sector, and potentially lead to fewer but healthier BFIs that are innovative in providing services
to the public, and also not take excessive risks to derail the entire economy.
2.2.5.2 Case Study: Bangladesh
Amin (2012) says commercial banks have recently launched fund-collection campaigns by
offering new saving schemes with higher interest rates in a bid to tackle the prevailing liquidity
crisis. Bankers said they were offering higher interest rates to lure people to keep their savings in
the banks. Funds are needed to ward off liquidity crisis the banks are currently facing.
2.3 Conclusion
This chapter discussed both theoretical and empirical literature review on causes of banks
liquidity challenges, the impact of the liquidity crunch on the economic growth, impact of
capitalization of banks on their liquidity positions and also the possible measures that can be
instated by both the central bank and the banks themselves in combating the liquidity challenges.
Effort was made to ensure the applicability of these postulations to the context of commercial
banks in Zimbabwe. Different authors have argued their points of view regarding different
aspects of liquidity challenges that have hounded the banking sector. The following chapter will
look at how the research was carried out, that is the research methodology to be used to carry-out
the relevant field research for collection of primary data and secondary. The chapter also gives
justifications on the methodology adopted to carry out the research.

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter focuses on the research design, population samples, research tools and the
procedures in which data was gathered. It outlines the vehicles that were used to steer the
research objectives as highlighted in the previous chapter, thus the framework within which this
research was carried out. This chapter also clearly outlines how the data collection instruments
were administered, the reasons for using them and basically the challenges that were faced in
collecting the data. The fundamental objective of this chapter is to outline the research plan that
was used and how it was administered.
3.1 Research Design
A cross sectional survey was conducted due to the nature of the research topic and the targeted
population. This method was done to gather relevant information from mainly three
constituencies, the commercial banks management, the RBZ and the economists. This survey
design was adopted, because the main objective of the study was to find out the impact of
multicurrency regime on bank liquidity challenges. The method also allowed for an overall
appreciation of all the financial players that are represented in this sector and results that are not
biased can therefore be obtained. The major shortcoming of this design was that most banks
under study were reluctant to divulge their information and they seemed not to have enough
knowledge of the bank liquidity challenges causes.
3.2 Study Population
The study population was made up of 11 commercial banks in Zimbabwe from the year 2009 to
2014 namely ZB Bank, CBZ, Barclays, Stanbic, Standard Chartered, MBCA, MetBank,
EcoBank, BancABC, AgriBank and Steward Bank, the banks‟ regulatory authority (the RBZ),
and the economists. Due to time and financial constraints, the banks that were surveyed were in
the city of Bulawayo and hence the population under assessment was confined to one city to
represent all the other branches. The researcher mainly targeted the banks‟ operations and branch
managers. Selection of respondents was on the basis of their knowledge, flexibility, availability

and convenience. Information was also sourced from economics academics and lecturers and for
the regulatory authority, the researcher visited the RBZ offices in Bulawayo.
3.3 Research Sample
The research sample included 11 Zimbabwean commercial banks, that is, the ZB Bank, CBZ,
Barclays, Stanbic, Standard Chartered, MBCA, MetBank, EcoBank, BancABC, AgriBank and
Steward Bank. To gather the primary data the researcher administered 2 questionnaires per bank,
2 to the RBZ and 4 to economists totaling to 28 questionnaires administered. All items were
enclosed and uppermost accuracy of information was likely to be acquired, thus, dependable
inferences to the area of study, conclusions and recommendations were drawn. The researcher
considered this sample size as optimum, that is, one that accomplishes the requirements of
efficiency, representativeness, reliability and flexibility.
Judgmental sampling was used in selecting the individuals to interview. This involved the
selection of key informants within the banking institutions and the stakeholders in the banking
sector. Key informants are people with the information or the know-how of what is being
investigated. They included branch managers, back office staff, supervisors, credit analysts, the
RBZ personnel and the economists. These people were selected because they are in a better
position to know about the economic performance of the banks since they are involved in routine
running of the institutions they work for.
3.4 Data Collection Methods
This section specifies how the researcher collected primary data and secondary data. For the
research to fully deliberate on the impact of multi-currency (dollarization) regime on the
liquidity challenges of Zimbabwean banks, pertinent material was required and to get hold of the
data, the researcher used both primary and secondary sources of data.
3.5. Primary Data
Primary data was collected by use of questionnaires and carrying out personal interviews. The
questionnaires were hand administered to banks‟ branch supervisors or the operations managers
for onward submission to the branch managers. The personal interviews were carried out on the
branch managers of the selected banks depending on their availability.

3.5.1 Questionnaires
The questionnaire was made up of both open and closed-ended questions. Respondents were also
asked to justify their answers to closed-ended questions to increase the information quality of the
response. A total of 22 questionnaires were administered to banks and regulatory authorities
while questionnaires numbering 5 to the economists.
3.5.2 Questionnaires Justification
Questionnaires were easy to administer as they had a wider coverage without having to supervise
completion of questions in your presence. The targeted population was easy to control through
the use of questionnaires, as they give guidelines to the respondents. Self-completion of
questions also formed part of confidentiality, which therefore generated more reliable and valid
information, taking into account the sensitivity of information revealed by financial institutions.
The questionnaire also had the advantage of having close ended questions that allowed for swift
responses towards the researcher‟s questions. Few open ended questions allowed for open
mindedness in finding the actual impacts, causes and possible solutions of multicurrency regime
on bank‟s liquidity crisis. They were also economic in terms of time management and financial
costs, as mostly were drop- and-pick instruments.
3.5.3 Questionnaires Shortcomings
Although this instrument is vital in data collection, a number of drawbacks were experienced.
Some of the questionnaires were not even returned by respondents, as other respondents feared
that the data required was so sensitive according to the Confidentiality section they signed in
their employee contracts. Other questionnaires were even misplaced by the respondents maybe
because of ignorance. All these negatively affected the response rate of questionnaires. Some
respondents gave their related partners/ staff to complete the questionnaires on their behalf
resulting in some questionnaires being completed by some respondents without having proper
knowledge pertaining to bank failure. By posing some closed ended questions it somehow
limited the respondents‟ free expression
However, the targeted respondents were persuaded to reveal the intended data, based on the fact
that the data will be used for academic purpose only. The research objectives and hypothesis

statement formed the backbone element in questionnaire structuring, so as to reduce the
ambiguity involved in questions setting.
3.5.4 Personal Interviews
Questions asked were those covered by the questionnaire survey, and other additional questions
were incorporated to add value to the interviews. This was meant to manage the response errors,
which otherwise would have arisen if the questionnaire approach alone had been employed in
data collection. The researcher managed to set-up personal interviews with 3 banking
institutions, namely BancABC, MBCA and Steward Banks. Interviews were also held with three
economics lecturers at NUST.
3.5.5 Personal Interviews Justification
Interviews enabled clarifications of questions that may have sound ambiguous to the respondent
on the questionnaires. This improved the quality of response, as it gave a better understanding to
the respondent on what is being really asked by the questions. They also opened discussions of
other questions that may not have been included in the questionnaire. This increased the
coverage of the data gathered related to the analysis of multi-currency regime impact on the
liquidity challenges faced Zimbabwean banks (2009-2014) and the effects of liquidity crisis on
the general economy well-being. The interviewer was in a position to check the eligibility of the
interviewee before any interview commences which improved the nature of targeted respondents.
This is because only those who are well versed with bank management practices, RBZ functions
and the general economy were chosen. The researcher was able to get spontaneous responses
from the informants interviewed. In addition, emotions and facial expressions were easily noted
from the interviewee, unlike the use of questionnaires that are completed in the absent of the
researcher.
3.5.6 Personal Interviews Shortcomings
Although, the aforementioned benefits were derived from the use of personal interviews, it had
also had its fair share of shortcomings too. Interviewer and interviewee bias, as the researcher
may somehow get confused by the nature of responses and questions asked by the interviewee
that will then result in further distortion to the actual quality of data. Interviews were time
consuming thus coverage was limited. The coverage was also limited as compared to

questionnaires, since the of the questionnaires were easily administered, unlike the use of
interviews they were difficult to set up required one to travel to that place, but because of time
and financial constraint some stakeholders were not interviewed.
The interviewer however, pronounced the parameters and frameworks upon which the responses
and research questions will be asked, so as to reduce bias. To promote a certain degree of
accuracy the researcher ensured that there is anonymity in the responses and assured the
respondents that the data would be used solely for academic purposes.
3.6 Secondary Data
To gather secondary data the researcher made use of RBZ publications, World Bank/IMF
publications. References were also made to textbooks and relevant journals on banks liquidity
crisis which were available during the time of the research. Secondary data was used by the
researcher to fill data gaps that primary data could not address. However because of the limited
information available in Zimbabwe even on the banks‟ liquidity crisis experienced in the country
the researcher had also to rely greatly on the internet articles even for information that should
have been readily available within the country. The internet availed information on causes and
possible remedies of banks‟ liquidity crisis in both the emerging and developed economies in the
region and abroad, like the recent events in Europe and Asia. The merits of using secondary data
encompassed the cost affordability and saves time.
3.7 Data Analysis
Due to the nature of the research study topic, both qualitative and quantitative data analysis were
used to analyze the findings which had been gathered in the research. Data collected from
respondents was translated into numerical values which represented the frequencies for the
responses obtained from the questionnaires administered and the personal interviews held by the
researcher. These frequencies were then represented in percentage scores for each response to an
area of focus specified on the questionnaire. The researcher also used descriptive statistics in the
analysis of the primary data collected.
3.8 Conclusion
The chapter gave information about how the research study was undertaken by showing the
research design adopted, the study population and the sampling techniques used for the purpose

of this research. The research design used provided the overall strategy for answering the
research questions for this research project. The questionnaire and interview responses were
coded and then tallied, question by question. Chapter 4 will enhance the validity of data collected
concerning the impact of multi-currency regime adoption of banks liquidity in Zimbabwe. It will
consist of graphs, charts and tables for data analysis, presentation and results discussion.

CHAPTER FOUR
ANALYSIS, PRESENTATION AND DISCUSSION OF RESULTS
4.0 Introduction
This chapter illustrates how data gathered from both primary and secondary research was
presented and analysed to evaluate the viability of the building society banking model in a
dollarized economy. The results of the analysis are presented diagrammatically and expressed in
percentages for ease of assessment. Data did not lend itself to statistical techniques hence content
analysis was used. Bar charts, pie charts and tables were employed to present the findings of the
research.
4.1.0 Response Rates Analysis
The analysis entails the computation of the number of questionnaires returned and personal
interviews conducted against the total number questionnaires administered and interviews
scheduled by the researcher.
4.1.1 Questionnaire Response Rate
The researcher administered a total of 28 questionnaires as shown in Table 4.1 below, 22 to
commercial banks in Zimbabwe, 2 to the RBZ and 4 to economists 10. Out of the 28, 22
questionnaires were returned to the researcher. Four and none questionnaires sent to commercial
banks and the RBZ questionnaires were returned respectively whilst all the questionnaires
administered to Economists were returned to the researcher. Commercial Banks, Economists and
the RBZ had 81.8%, 100% and 0% response rates respectively giving an average response rate of
78.6%.
Table 4.1: Questionnaire Response Rates
RESPONDENTS ISSUED RETURNED RESPONSE RATE %
Commercial Banks 22 18 81.8
Economists 4 4 100
RBZ 2 0 0
Total 28 22 78.6
[Source: Primary Data]

Figure 4.1: Distribution of Questionnaires Respondents
From the above pie chart in Figure 4.1, of the total of 28 questionnaires that were administered
by the researcher, 60.7% of them were issued to the Commercial Banks, 14.3% were
administered to Economists and the remaining 7% constituted of the RBZ.
4.1.3 Personal Interviews Response Rates
The researcher also held personal interviews to collect data for analysis. The personal interview
had a response rate of 47% as shown by Table 4.2 below. Out of the plan total of 15 interviews,
the researcher managed to conduct only 7. The researcher only conducted interviews with three
banks namely BancABC, Standard Chartered bank, FBC and Steward Bank, and also with three
of the four selected economists. The other commercial banks and the Reserve Bank of Zimbabwe
declined the personal interviews, due to their busy schedules and anonymity issues. The
interviews were held as a follow up on the administered questionnaires, as some of the
respondents avoided open ended questions in the questionnaires.
Table 4.2 Interview Response Rates
INTERVIWEES PLANNED HELD RESPONSE RATE %
Commercial Banks 10 4 40
Economists 4 3 75
RBZ 1 0 0
Total 15 7 47
Commercial Banks
60.7%
Economists
14.3% RBZ
7%
Commercial Banks
Economists
RBZ

Figure 4.2: Distribution of Interviews Respondents
From the above pie chart, of the total of 15 personal interviews that were planned by the
researcher, 67% of them constituted of the Commercial Banks, 27% were conducted to
Economists and the remaining 7% constituted of the RBZ.
4.2 Does Multicurrency Regime Adoption have Impact on Liquidity of Zimbabwe
Banks
Figure 4.3: Respondents on the impact of multicurrency regime on bank liquidity
Commercicial
Banks
67%
Economists
27%
RBZ
7%
Commercial Banks
Economists
RBZ
0
2
4
6
8
10
12
14
16
Commercial Banks Economists RBZ
YES
NO

From Figure 4.2, 22 questionnaires that were returned to the research, 15 of the commercial
banks and 3 of the Economists respondents revealed that multicurrency regime adoption have an
impact on the liquidity of Zimbabwean banks whilst three commercial banks and one economist
viewed that multicurrency adoption has no impact on the liquidity of the banks. The researcher
could not ascertain the stance of the RBZ on the issue as none of the two questionnaires
administered to them were returned to the researcher.
On the contrary, all of the respondents except for the RBZ that held personal interviews with the
researcher revealed that multicurrency regime adoption has an impact on the liquidity of
Zimbabwean banks. In summary, 81% of the respondents viewed that multicurrency regime
adoption has an impact on banks‟ liquidity whilst the remaining 19% disagreed the assertion as
shown on Figure 4.3 below.
Figure 4.4: Impact of multicurrency regime adoption on banks’ liquidity

4.3 Causes of Liquidity Crisis in Zimbabwean Banks
The researcher gathered the causes of liquidity crisis in the Zimbabwean banking sector. The
researcher managed to give the respondents options to choose from the pool of causes that were
given in the questionnaire, and also gave room for the respondents to add what they thought had
a hand on the causes of liquidity challenges in Zimbabwean bank issue.
Figure 4.5: Causes of Banks Liquidity Challenges
From Figure 4.4, all of the respondents viewed that the absence of the lender of last resort role
(LLR) by the RBZ post adoption of the multiple currency regime in February 2009 is the major
cause. The defunct of the RBZ meant banks could not access quick funds from the central bank
and have to rely on other alternative credit lines and that have seen banks many banks if not all
encounter liquidity crunches or even collapse in worst cases scenarios like Capital Bank Limited,
Interfin Banking Corporation and Trust Bank Limited in the last quarter of year 2014 (MPS, Jan
2015).
89% of the respondents pointed out that NPLs are a cause as a result of exorbitant interest rates
of lending ranging between 12% and 25% per month as at 31 December 2014 in most of the
Zimbabwean banks. These high costs of borrowing within the banking sector are attributable to
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
YES
NO

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