Investment Strategies of Commercial Banks in Financial Market

Abstract

In today's market conditions, the classical deposit-credit strategy is no longer sufficient for commercial banks to survive in the financial market and achieve a sufficient level of profit.

In addition to the loan placement strategy, it is necessary to adopt an adequate investment strategy that will contribute to the profitability, liquidity and security of the overall asset portfolio. Commercial banks, unlike investment banks, place a smaller portion of their funds in securities with different maturities in the financial markets. However, with increasing competition from banks and other non-banking institutions, the importance of the investment portfolio as an alternative that provides additional sources of revenue, ensures liquidity, ensures diversification of placements and reduces risk exposure. Banks have at their disposal a wide range of investment strategies that they can combine depending on their investment goals and risk aversion, such as passive and active strategy, ladder strategy, weight strategy and the like. The aim of this paper is to show the importance of the investment portfolio in commercial banks and the basic investment portfolio management strategies that commercial banks can use.