Liquidity risk: monitoring, reporting and managing
Global regulatory regimes
The events of the last couple of years have highlighted just how inadequate existing liquidity management, measurement and reporting regimes have been. As a result of this, international regulatory bodies such as the Bank of International Settlements (BIS) and the Committee of European Banking Supervisors (CEBS) moved liquidity risk management and supervision higher up the global regulatory agenda and significant changes to existing liquidity regimes are underway.
The UK’s FSA enforced the first set of rules and strict deadlines set out in its Policy Statement ‘Strengthening capital standards’ (PS 09/16), but now more and more countries are following suit. (For further details of the UK liquidity requirements please visit out UK liquidity page.)
To effectively manage what is required, a robust liquidity risk management framework (i.e. strategy, policy and practices) that ensures sufficient liquidity has to be established. This includes the maintenance of a cushion of unencumbered, high quality liquid assets in order to withstand stress events, including those involving the loss or impairment of both unsecured and secured funding sources.
Proven liquidity solution
FRSGlobal combines a risk management / stress engine and regulatory reporting platform to enable firms to monitor, manage and report liquidity - as well as build and develop a library of stress tests in accordance with the regulators’ requirements. FRSGlobal’s liquidity solution is the only product on the market that offers a single platform from a single data source, providing “a single version of the truth”.
The solution is being increasingly adopted by firms and was ranked joint first for 'Completeness of offering in the ALM and Liquidity Marketplace' in the Chartis market analysis report - as it provides its customers with solutions for all aspects of the new liquidity regime.
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So how can we help you? The FRSGlobal liquidity solution can handle all the required financial products to produce the regulatory output as per the regulators’ requirements. It is capable of doing this in a straight-through-processing method if required, with the minimum amount of user input once the data has been loaded and validated. The FRSGlobal liquidity risk solution also has the ability to produce XML output and automatically submit reports to the regulators’ internal systems, such as the FSA’s GABRIEL system.
Put simply – FRSGlobal can automate everything from the submission of data to the production of reporting as and when the regulator requires. |
Download full details on the FRSGlobal solution for UK liquidity risk requirements » (36.78 kB)
As firms are confronted with aggressive deadlines from the FSA to put in tighter liquidity risk controls, it is important to understand the implications that these new regulations will have
Each country has its own interpretation of regulations
Select from the regions and countries below for further details of specific ones
Definition
Funding liquidity risk: the risk that a firm will not be able to meet cash flow and collateral needs.
Market liquidity risk: the risk that a firm cannot sell or offset a position because of market conditions.
Liquidity Refreshment Event
Delegates from many UK firms that are impacted by the FSA's regulations on liquidity, gathered at the Ironmongers Hall in the City of London at the invitation of FRSGlobal.