Institutions, Capital Control and Liquidity Creation

Liquidity creation 1Funding illiquid assets with liquid liabilities“Catfat” and “catnonfat” Liquidity Creation (LT Gap)The difference between liquid liability and assets as a percentage of total assets (Liquid Liabilities-Liquid assets)/Total Assets Capital ControlFinancial Openness(Export +Import)/ GDP Bank capital Ratio of equity to total assets Total Equity/ Total assetsInstitutional qualityThe quality of the country’s institutional governanceAn index of rule of law, governance efficiency, control of corruption and politicalstability Economic PerformanceThe economic performance of countryLog of GDP per capital Bank Size Size of the bankNatural Logarithm of Total AssetsRiskThe level of risk faced by the banksStandard deviation of ROAFlotation The exchange rate system of a countryDummy variable (1 equals floating system, 0 otherwise)Regulatory Requirement The banks’ capitalrequirement of each country