Liquidity


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Related to Liquidity: Liquidity ratio, Liquidity risk

Liquidity

 

the mobility of the assets of enterprises, firms, or banks in capitalist countries, ensuring the genuine ability (capability) to pay off within a given period all liabilities and lawful monetary claims.

The degree of liquidity is defined as the ratio between the ready money and quickly salable assets of an enterprise, firm, or bank and the sum of its short-term liabilities. Quickly salable (liquid) assets include government securities, the stocks and bonds of large corporations (which can always be sold on the stock exchange), fixed-term promissory notes of respectable firms (which are accepted without difficulty for discounting and rediscounting by banks), and gold and other precious metals. Also included in calculations of liquidity is assured debtor liability, that is, accounts receivable and the like that can be repayed on first request or within a brief period. Easily salable material-commodity resources are also considered among the liquid assets of industrial and commercial enterprises. The higher the percentage of assets that can be rapidly converted into ready cash, the greater the liquidity of an enterprise, firm, or bank.

The liquidity of commercial banks—the uninterrupted payment of depositor claims—is of particular importance in the capitalist economic system. In order to assure such liquidity, legislation on banking usually establishes the level of cash reserves that commercial banks must maintain in a central bank; the level is determined as a percentage of the total current assets and term deposits and is referred to as a minimum bank reserve.

Business fluctuations and, in particular, economic crises lower the liquidity of enterprises, firms, and banks and lead to many bankruptcies. Under the conditions of the general crisis of capitalism, the liquidity of less powerful banks is declining; they are being absorbed by larger banks, which in turn merge into giant banks.

A specific form of liquidity is international liquidity, defined as the ratio between the gold currency reserves of governments and central banks of the capitalist countries and the sum of their foreign payments that must be guaranteed by these reserves. After World War II this ratio declined, leading to a sharp aggravation of the problem of international liquidity. Circulation related to foreign trade expanded considerably, in terms of physical volume and especially in terms of value. This expansion was a result of general inflation and the rise of prices, combined with an uneven distribution of gold-currency reserves and the relatively stable level of the overall total of these reserves. (This stability is due in part to the depressed price of gold, which was artificially maintained by the USA: prior to December 1971 the price of gold was $35 per troy ounce, after which it rose to $38 and then, in February 1973, to $42.20.)

M. G. POLIAKOV

References in periodicals archive ?
"That liquidity is expected to be slowly released as the line agencies start to spend on their projects," Lapid said.
"The narrative that has reigned in the local foreign exchange market for the last three sessions is of frivolous foreign currency inflows unable to match the increasing dollar demand," said Commercial Bank of Africa in a treasury note."Analysts will be closely monitoring developments around the fifteen-year bond issued by the CBK, and whether it will aid in curbing the rising liquidity levels which seem to propel dollar demand.
The BSP said the extension will give the banks 'sufficient time to build up their liquidity position' given the combined impact of these liquidity measures.
Al Ramz Capital will perform its duties as a liquidity provider through a specialised department, which is made up of equity professionals with over 30 years equity market experience between them.
The average liquidity deficit was at INR1.58tn for the week ended December 28, higher than the average liquidity deficit of INR1.49bn in the previous week.
The Bank of New York Mellon Trust Company, NA, acting as Issuing and Paying Agent (IPA), will continue as the Issuing and Paying Agent for the notes, and as IPA, is directed to request an advance under the substitute liquidity facility whenever proceeds of the sale of rollover notes and other funds of the City of San Antonio are insufficient to pay maturing notes.
Al Ramz was the first company to obtain a licence as a market maker on ADX in 2016 and the first company to launch its Liquidity Provision service on the ADX in 2017.
As market maker and liquidity provider, Sico, which is also a major participant in UAE markets through its Abu Dhabi-based subsidiary, Sico Financial Brokerage, will help narrow the spread between bids and offers, and encourage further trading.
The slight year-on-year boost to the numbers partly reflects ratings withdrawn for companies following a default, and which had previously exhibited weak liquidity, said the report titled "Non-financial companies -- EMEA: Sustained overall liquidity strength, despite geopolitical risks".
As defined by the BSP, the NSFR measures a bank's ability to fund its liquidity needs over one year.
BEIRUT: The international ratings agency Moody's has described Lebanon's implementation of the Basel liquidity coverage ratio as credit positive.
Al Ramz Capital has been re-appointed as a liquidity provider for Union Properties Shares after obtaining the necessary approvals from Dubai Financial Market and signing the agreement.