the Management of Bank Liquidity and its effect on Return and Risk An Applied study in Iraqi Government Banks

    The subject of liquidity management is one of the most important subjects in the commercial banks . When there is an economic using for the banks’ resources , this mean , there is a good economic management works to stabilize banks’ financial center . Then , the commercial banks have a problem of an equilibrium between the main aims of the banks’ activity as the : profit , liquidity , and safety . Thus , the banks’ activity concentrates on creating a kind of an equilibrium between these aims or the three requirements by keeping a little deal of liquidity .

             This study is very important , because it considers the frame which the operation of banks’ money management will happen in it . So , this subject has a great deal of interest in studies of the banks’ management , because of its effect on achieving the banks’ aims . So , the study came to have this subject that is “ Banks’ liquidity effect on Return and Risk ’’ , and to concentrates on this problem : “ Is there any effect for the banks’ liquidity on return and risk ? ’’ . attending to a chieve these following aims :-

1. Investing the a vailable liquidity in the chances of investment which have a low risk and a high

     return or with those which have the best return at the least risk .

2. A vailabity of liquidity when the bank siffers from the deposits’ with drawals demands or from

   staying on matured money .

3. Responding to demands of businessmen and investors when there is increaing need on the loans

   in the boom .

   In order to a chieve these aims , there were two main hypothesis and each one of them has two sub – hypothesis as the following :-

1. There is a correlation of a statistical remark between the banks’ liquidity and both the return and the risk .

                           Its two sub – hypothesis are :-

1. There is a correlation of a statistical remark between the banks’ liquidity and the return .

1. There is a correlation of a statistical remark between the banks’ liquidity and the risk .

2. There is an effect relation between the banks’ liquidity and both the return and the

     risk .

                             Also this hypothesis has two sub – hypothesis as the following :-

1. There is an effect relation between the banks’ liquidity and the return .
2. There is an effect relation between the banks’ liquidity and the risk .

   By using the annual reports for the two banks ( Al – Rafidain and Al – Rasheed ) for the period   ( 1995 – 2001 ) , there were percentages which are regarded as remarks for liquidity resources and for return and risk , and through the use of simple linear regression way and its confficient correlation coefficient and determination coefficient and test of ( F ) , the above mentioned hypothesis were tested which were being acceptable . Depending upon the finding of analyzation , this study reached several conclusions , the most important one is the moral relation of a statistical remark between the banks’ liquidity and both the return and the risk , and this study also concluded that deposits are the most important financial resources for the two banks to provide them with the liquidity . Besides there are several recommondations to improve the position of these banks , one of these is that : banks must support their capitals through their accumulative reserves to equate with the increase ratio in their deposites in order to make them able to contribute in financing the economic groups with their needs of the long – and medium – term loans . Also the Iraqi Centeral Bank and the others must concentrate their activities to improve the role of the Iraqi banks and to be ready for the period after the economic blockade with a futurity view in a new banking invironment .