The Correlation Between the Type of Customer Deposits and the Adequacy of Liquid Assets for Liquidity Risk Compliance in the Liquidity Coverage Ratio (LCR) And Its Impact on Profitability (ROA)
Year: 2025
Type: article
Abstract: Liquidity risk management in banking is crucial and must be maintained at all times. Banking history has shown that bank failures are often caused by the bank's inability to meet obligations, particularly those arising from customer deposit withdrawals. When a bank fails to meet its deposit obligations, it can trigger a wave of withdrawals, resulting in a loss of customer trust in the bank. Since the implementation of liquidity risk monitoring using the Liquidity Coverage Ratio (LCR) indicator, specifically by the Otoritas Jasa Keuangan (OJK) in 2015, many banking practitioners until now still emphasize it as a mandatory reporting requirement for regulatory compliance. However, within the context of the LCR, banks are required to understand the characteristics of the deposits they manage through several established parameters. Banks are directed to focus more on stable and sustainable deposit growth to support their intermediary business. Therefore, the liquidity requirements are highly dependent on the characteristics and types of deposits held by the bank. The results of this study shown that a stable deposit composition directly impacts the interest costs that must be paid by the Bank and will certainly also impact the achievement of profitability that the Bank wants to achieve through the Return On Ass et (ROA) indicator and simultaneously comply with regulatory liquidity risk compliance.
Authors: Dharma Magita, Dr. Herry Sussanto
Institution: Gunadarma University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7077546510
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