Impact of Interest Rates and Credit Structure on Liquidity andStability of Banking Sector of the Euro Area

Liquidity of the banking sector is linked to the risk and profitability of the banking sector. In this relationship it is possible to analyze the possible development scenarios as part of stress tests as in relation to the structure of assets and liabilities. The Bank's liquidity indirectly relates the evolution of market interest rates and the cross-correlation between different groups of assets held by banks. The Bank's liquidity is also related to the theoretical concept of the net value of the bank.