Analyzing the Factors Affecting the Liquidity of Credit Market in Taiwan after Financial Tsunami

Financial tsunami was caused by the bankruptcy of Lehman Brothers Holdings Inc. in September 2008. In order to maintain stableness of financial market furtherly, Basel Committee on Banking Supervision (BCBS) issued Basel �M, which includes more stringent rule of bank of international settlement ratio (BIS ratio) and leverage ratio. The new version of Basel accord will be implemented in 2019. This study wants to examine which factors affect the liquidity of credit market in Taiwan after financial tsunami and divides factors into supply-side effects and demand-side effects. The objects of the study are 40 Taiwanese banks during 2008Q4 to 2015Q3. Moreover, this study uses panel data model to make empirical analysis. Empirical results find that： (1) Generally, supply-side effects like BIS ratio、leverage ratio and non-performing loans ratio deeply affect the liquidity of credit market. (2) BIS ratio is not a significant factor when state-controlled banks make loans to SME companies. The reason may be that due to the consideration of government policies, BIS ratio is not the most important factor in their credit policies. (3) Demand-side effects play more important role in private banks. Maybe it can conclude that private banks are more active to catch the demand of credit market than state-controlled banks do.