Abstract

The banking sector is viewed as an important source of financing for many businesses. In order to appraise and weigh up the soundness and reliability of banking industry, the information on the risk and how the fluctuations are managed are important to consider. Among the financial risks liquidity risk of the bank are crucial to consider. Appalling financial condition of the banks can lead to decreasing the value of bank. Managing the liquidity risk is required to be monitored and managed effectively and cautiously. Liquidity management is part of the larger risk management of the banking sector, whether they are conventional or Islamic. This study investigated the size of the bank, Non-performing loan ratio (NPL), return on assets (ROA), return on equity (ROE), capital adequacy ratio (CAR) with the liquidity risk of conventional and Islamic banks of Pakistan. The study is done on the secondary data for the period 2007-2010. The study found the significant and positive relation of CAR, ROA, ROE and size of the bank with the liquidity risk in both the models, whereas the negative and significant relation of NPL is observed in both the models.