How Much Liquidity Does A Bank Need?
- Moneta Training
- Mar 11, 2021
- 2 min read
Updated: Mar 12, 2021
A REGULATOR'S VIEW
The ‘Pillar 1’ Liquidity Coverage Ratio or LCR, tells banks the minimum amount of cumulative liquidity they need to hold to survive a 30 day stress. It is however only the start of a bank’s assessment of their overall liquidity requirement, not the end.
Under ‘Pillar 2’ regimes, banks are required to conduct a firm specific assessment of what additional liquidity they need to hold to cover cashflow mismatches on a more granular daily basis in addition to the the 30 day LCR window and beyond and on an intra-day basis as well.
Additionally they must assess what additional liquidity they must hold due to other risks not covered by the LCR such as increased outflows on initial/securities financing margins, loss of intra-group funding and/or failures of liquidity systems and controls. Whether as part of the ICAAP Liquidity Assessment or a dedicated ILAAP, it is crucial that banks see these assessment not as just a process to generate a document but as process to generate a risk management architecture that is reflected in the bank's commercial strategy.
Moneta Financial Training is delighted to invite you to this short taster session of our ILAAP workshop and offer you the chance to hear first-hand from a recent prudential regulator their view on what makes a ‘good’ Pillar 2 liquidity assessment:
What they see as the key components of it
What bank’s can expect from a liquidity assessment in a supervisory review and evaluation process – or SREP for short
What gives efficacy to liquidity stress testing and
How does/should the Pillar 2 assessment link to the bank’s Liquidity Contingency plan
‘How much liquidity does a bank need?’ – A regulator's view March 24th 2021 11.00am – 1230pm (GMT)
If you or any colleagues would like to attend this virtual session please email sbarker@monetatraining.co.uk for more details
Your facilitator is a regulatory liquidity risk management expert. His depth of knowledge stems from over 12 years’ front-line experience as a Technical Specialist in prudential regulatory risk management with the UK’s Financial Conduct Authority. There, he was instrumental in the development and implementation of the FCA’s ground breaking ‘BIPRU 12’ liquidity regime.
Combined with over 15 years international treasury operations and consulting expertise, latterly at director level with global consultancy firm EY, he has a rich and extensive understanding of the prudential liquidity requirements and expectations within banking, enabling him to deliver unique insights and robust perspectives on the significance of prudential risk management for firms’ financial survival in times of economic stress. This understanding of regulatory expectations is an essential conduit for banks to demonstrate liquidity adequacy against regulatory requirements.
