Importance Liquidity and the need to maintain it remain one of the most crucial challenges for the banking sector, thus requiring to improve the liquidity management mechanism. As adopted under Basel III, Russia introduced the short-term liquidity ratio on 1 January 2016. The article reviews the specifics of the short-term liquidity ratio, its strengths and weaknesses, difference from the existing indicator N3, evaluates and forecast how banks will manage to maintain this ratio, and suggests how the liquidity management systems should be modified in order to meet the short-term liquidity ratio. Objectives The research reveals the substance and significance of the short-term liquidity ratio, difficulties for banks to comply with it, devises measures to meet the short-term liquidity ratio as required. I also pursue calling the banking community’s attention to short-term liquidity issues and an urgent need to choose measures to change its management paradigm. Methods Based on a comparative analysis, synthesis of theoretical and practical materials, I suggest using a set of measures to optimize the short-term liquidity management in banks so to meet the required ratio. Results I evaluated the short-term liquidity ratio, its significance for the banking sector, possibility to comply with its, and suggested how the short-term liquidity management could be improved. Conclusions and Relevance Notwithstanding difficulties in complying with the short-term liquidity ratio, the Russian banks are evaluated to be capable of maintaining it, provided that they meet certain conditions. They should implement new liquidity risk management tools and activate the existing ones, develop the stress testing mechanism, methods and formats of the Central Bank of Russia’s refinancing for credit institutions so to compensate the shortage in highly marketable assets needed to meet the ratio. The results can be useful for purposes of corporate governance in banks, business planning, stress testing, management of assets and liabilities, internal transfer pricing.
Keywords: Basel III, short-term liquidity ratio, marketable assets, liquidity management, stress test
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