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Sensitivity of Czech Commercial Banks to Run on Banks

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  • Pavla Klepkova Vodova

    (Silesian University in Opava)

Abstract

The aim of this paper is to thoroughly evaluate the sensitivity of Czech commercial banks to a run on banks. Our sample includes a significant part of the Czech banking sector in the period 2006–2013. We use three liquidity ratios that we stress via a stress scenario simulating a run on banks accompanied by a 20% withdrawal rate of deposits.We measure the impact of the scenario by the relative changes of these ratios. The results show that, in spite of a decrease in liquidity, most Czech banks would be able to finance such a scenario. The financial crisis influenced bank sensitivity to a run, but with a significant time lag. The severity of the impact of the bank run increases with the size of the bank; large banks are the most vulnerable. The resilience of banks is also determined by their strategy for liquidity risk management.

Suggested Citation

  • Pavla Klepkova Vodova, 2015. "Sensitivity of Czech Commercial Banks to Run on Banks," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 91-107, June.
    • Handle: RePEc:cmn:journl:y:2015:i:2:p:91-107
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