The impact of credit policy on the liquidity structure and returns in Libyan banks

Abstract

This research aims to study the impact of credit policy on both liquidity structure and financial returns in Libyan commercial banks during the period from 2015 to 2025. A descriptive–analytical–quantitative methodology was adopted, relying on published financial data from several major Libyan banks, such as Jumhouria Bank, Wahda Bank, and the National Commercial Bank. The study employed SPSS and EViews software to analyze correlations and regressions among the key variables, with the objective of identifying the nature and direction of their statistical relationships.

The results revealed a statistically significant positive relationship between credit policy and financial returns, indicating that improving loan-granting policies contributes to enhancing bank profitability. Conversely, the study found a negative relationship between credit policy and liquidity structure, as expansion in lending leads to a decrease in the level of liquid assets held by banks.

These findings suggest that effective management of credit and liquidity risks is a decisive factor in achieving a balance between profitability and financial stability in Libyan commercial banks. Accordingly, the study recommends adopting cautious and well-considered credit policies that ensure rewarding financial returns without adversely affecting liquidity levels, while adhering to modern banking standards in risk management.