The analysis on the liquidity and capital management strategies and its impact to the banks' profitability
The financial crisis of 2007-present has proven to be the worst crisis which has taken a heavy toll on the financial system in United States. Surprisingly, the financial industry in Indonesia is able to maintain decent performance. Even though the banks in Indonesia are able to sustain their performance, the banks are still experienced declined of the profitability in the year 2008. rnrnThe plunged in the banks' profitability in the year 2008 is mainly caused by the cost from excessive credit expansions, growth in the NPL and losses from the realization of the derivatives transactions. Moreover, these excessive credit expansions and increasing NPL have fueled other vulnerabilities in banking sector, for instance: the banks suffered tightening liquidity and falling asset values, which depleted the banks' capital and further lessened the profitability.rnrnrnrnrn The research is going to study on the correlation between the capital and liquidity towards banks' profitability. The analysis would use the financial ratios; CAR, LDR, NPL, and two other variables; total third party funds and total loans; as the variables measurement to confirm the correlation between the capital, liquidity and profitability. From the research, there have been quite interesting findings, as the correlation between capital, liquidity and profitability have confirmed the current situation in the systems.
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