Liquidity Management by the Major Australian Banks

[Name of the Faculty]

[Submission Date]

[ID Codes]Assignment Declaration

We are extremely grateful towards our faculty for imparting us knowledge in the most meaningful manner. The knowledge gained through this course will take us a long way into meeting our career objective. We solemnly declared that the work which we have done is completely a product of our own knowledge, data taken from other sources has been correctly credited in the form of referencing.

Abstract

The paper talks about liquidity and how prudent measures should be adopted by Banks in meeting liquidity requirements. Four Australian Banks are analysed in depth and their liquidity practices are analysed. The impact of available for sale securities are analysed and the relation of deposits to total liabilities are given. In the end the on the performance of the banks, the best performing bank will be highlighted. Discussion as per liquidity management will be done.

Table of Contents

ASSIGNMENT DECLARATION2

ABSTRACT3

INTRODUCTION5

Discussion6

Liquidity needs6

ANZ6

National Australia Bank8

Westpac group9

Common wealth Bank of Australia11

Deposits over total liabilities12

ANZ12

National Australia Bank13

Westpac14

Common wealth bank15

Available for sale securities15

ANZ15

Table 1: Liquid Assets ANZ16

National Australia Bank17

Table 2: Liquid Assets National Australia Bank17

Westpac17

Table 3: Liquid Assets Westpac18

Common wealth bank18

Table 4: Liquid Assets Common wealth bank19

Liquidity Management19

ANZ19

National Australia Bank20

Westpac20

Common wealth Bank20

CONCLUSION20

REFERENCES22

APPENDIX24

Liquidity Management by the Major Australian Banks

Introduction

Liquidity generally is known to be an organizations ability to meet its short term obligations. For a firm to meet its short term obligations, liquid assets are required (Bangia A, et al, 1999). When we refer to liquid, we hold that those assets which can be quickly converted into cash (Basil Committee, 2008).

For a Bank, an integral component of their liability comes in the form of deposits (Leonard Matz and Peter Neu, 2007). This comprises of the Bank's savings deposits, deposits from money market and savings certificate. The backbone of an economy's savings are held in Banks primarily, to meet this commitment Banks needs to adopt prudent practices to ensure it meet its commitment overtime (Diamond, Douglas and Phillip, 2000).

When we talk about Banks, all of them are closely interlinked (Frankfurt, 2012). Taking the example of National Australia Bank, if there is a negative news associated with this Bank in the form of losses being suffered by the Bank this can prompt customers to take their deposits out from the Bank. In this case, the Bank will come under a lot of pressure to meet its financial commitment; the Bank will resort to interbank borrowing which will create an added pressure on other banks to meet its debt obligations. In this way the whole system will got affected creating severe strain on the financial institutions (Moody's Investors Service, 2001).

A detail analysis of Australia's four major Banks including ANZ, National Australia Bank, Westpac and National Australia Bank and their liquidity management would be discussed in great depth. Comparison will give us a comprehensive overview of which Bank has the least risk of liquidity crises.

Discussion

Liquidity needs

ANZ

From 2007 to 2008 assets went up by 25.8%, while total liabilities went up by ...