Search

A forthcoming introduction of the new liquidity standards for banks (Basel III/CRD IV) imposes a need for evaluation of a degree of homogeneity across banks as regards the liquidity policies. The aim of this paper is therefore to classify the banking sectors from selected European Union countries according to their liquidity position. The sample, which is unbalanced, consists of 417 banks established in 21 European countries. The analysis envisions a 7-year time period from 2006 to 2012. The methods deployed in the study are principal component analysis (the PCA), Ward's clustering method and k-means clustering. The variables selected for the research are several balance sheet ratios reflecting the liquidity position of banks. The liquidity ratios are extracted from Bankscope. For the purpose of consistency of the results, standardized data is used and outliers are removed. The outcomes of the three different analyses are compared against each other in order to provide a relatively stable classification of the European banking sectors. [ABSTRACT FROM AUTHOR]