Liquidity Stress Detection in the European Banking Sector

Richard Heuver, Ron Triepels

2019

Abstract

Liquidity stress constitutes an ongoing threat to financial stability in the banking sector. A bank that manages its liquidity inadequately might find itself unable to meet its payment obligations. These liquidity issues, in turn, can negatively impact the liquidity position of many other banks due to contagion effects. For this reason, central banks carefully monitor the payment activities of banks in financial market infrastructures and try to detect early-warning signs of liquidity stress. In this paper, we investigate whether this monitoring task can be performed by supervised machine learning. We construct probabilistic classifiers that estimate the probability that a bank faces liquidity stress. The classifiers are trained on a dataset consisting of various payment features of European banks and which spans several known stress events. Our experimental results show that the classifiers detect the periods in which the banks faced liquidity stress reasonably well.

Paper Citation

in Harvard Style

Heuver R. and Triepels R. (2019). Liquidity Stress Detection in the European Banking Sector.In Proceedings of the 11th International Conference on Agents and Artificial Intelligence - Volume 2: ICAART, ISBN 978-989-758-350-6, pages 266-274. DOI: 10.5220/0007395602660274

in Bibtex Style

@conference{icaart19,
author={Richard Heuver and Ron Triepels},
title={Liquidity Stress Detection in the European Banking Sector},
booktitle={Proceedings of the 11th International Conference on Agents and Artificial Intelligence - Volume 2: ICAART,},
year={2019},
pages={266-274},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0007395602660274},
isbn={978-989-758-350-6},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 11th International Conference on Agents and Artificial Intelligence - Volume 2: ICAART,
TI - Liquidity Stress Detection in the European Banking Sector
SN - 978-989-758-350-6
AU - Heuver R.
AU - Triepels R.
PY - 2019
SP - 266
EP - 274
DO - 10.5220/0007395602660274