ASSESSMENT OF LIQUIDITY RISK MANAGEMENT: - A CASE STUDY IN BANK OF ABYSSINIA

Abstract

The main purpose of the study is to assess the liquidity risk management practice in bank Abyssinia from the year 2013-2016. There are four fundamental research question were formulated. The research examine the of source of liquidity risk in bank, Assess liquidity level or position of the bank, Examine liquidity risk contingent plan and strategies and examine the strength and weakness towards managing liquidity risk management practice. To conduct the study, descriptive method was employed. Purposive sampling technique was used in the selection of department in the bank of Abyssinia. Thus, risk and compliance department, treasury department and finance department employees who are directly related to the subject matter is selected. The total number of respondent 20 was selected from the three department working related to the subject matter. Data collected both primary data and secondary data. The primary data collected through questioner and interview and Secondary data like annual report were used. The data collected from primary source of data were organized table and percentage. The findings of the study revealed that the bank experience seasonal fluctuation in the source of funds which exposed to liquidity risk. The bank has strategies and contingency plan to meet emergency situation. ALCO committee periodically measure and report the level or position of liquidity risk of the bank continuously. So, the bank has strong side in preparing strategies and procedure. Also measurement and reporting system is a good practice. But, limited source of funds and lack of coordination between departments face the bank to unable to meet short-term obligation