Banking management in the prism liquidity – profitability interrelation

Within a banking company, an important task is to estimate and cover the liquidity needs of the bank. In fact, achieving and maintaining this goal requires real art, as a low level of liquidity leads to significant cash reductions and the need to attract additional resources at high cost, resulting in a decrease in bank profits and excessive liquidity. The return on assets decreases, resulting in poor financial performance. Within a banking company, the most important banking activity is the attraction of money on the market in order to grant loans, thus aiming to obtain as much profit as possible. Any banking activity is accompanied by risks. These risks have negative effects on the bank’s activities, such as: deterioration in business quality, impairment of the bank’s functionality, decrease in profit, loss, entry into insolvency, bankruptcy.