Liquidity Risk Management - Supervisory Requirements and Industry Practice

Monday, November 6

09.00 - 09.15 Welcome

09.15 - 12.00

Introduction

  • Defining liquidity risk
  • Basel III framework
    • Capital and Liquidity
  • The need for liquidity risk management
  • Case studies
    • Lehman
    • Northern Rock
    • Bear Stearns

Regulatory Requirements

  • BCBS136 and BCBS144 - the principles
  • The LCR (liquidity coverage ratio)
    • LCR Disclosure Requirements
    • Scope, timeline and Phase-In requirements
    • Frequency of reporting
    • Quantitative vs. qualitative requirements
    • Reporting Template design
    • High Quality Liquid Assets
      • Definition and Characteristics
      • Types - Level I vs. Level II
      • Operational requirements
      • Treatment of specific assets (MBS, Equities)
      • Treatment of assets received as collateral
    • Net Cash Outflows
      • Definition
      • Calculation
      • Run-off factors and inflow rates
      • Treatment of specific instruments (derivatives, stable vs. non-stable deposits)
      • Effects of downgrade triggers, valuation changes, etc.
  • Exercise/example Calculating LCR using published bank data

12.15 - 13.15 Lunch

13.15 - 17.00

Regulatory Requirements (continued)

  • NSFR (net stable funding ratio)
    • NSFR Disclosure Requirements
      • Scope, timeline and Phase-In requirements
      • Frequency of reporting
      • Quantitative vs. qualitative requirements
      • Reporting Template design
    • Components for NSFR Calculation
      • Available amount of stable funding
      • ASF categories/factors
      • ASF category components
      • Treatment of derivative liability amounts
      • Interdependent assets and liabilities
      • Required amount of stable funding
      • RSF categories/factors
      • RSF category components
      • Treatment of encumbered Assets, derivatives, secured financing transactions and off-balance sheet exposures
      • Interdependent assets and liabilities
  • Exercise/example Calculating NSFR using published bank data

Tuesday, November 7

09.00 - 12.15

Related topics

  • Related measures used by industry
  • Intraday liquidity
  • CRD and CRR draft revisions (November 2016)
  • Consideration of interest rate risk and IRRBB requirements
    • Another look at the LCR and NSFR exercises
  • Liquidity Transfer Pricing (LTP) and other risk transfers

Role-Playing Exercise

  • Prepare an LCR regulatory report based on the earlier exercises but with revised assumptions
  • Meet the regulator for a regulatory review meeting
  • Exercise review and discussion

12.15 - 13.15 Lunch

13.15 - 16.30

Related regulatory topics

  • ILAAP
  • FRTB/Revised CRR
    • Position and risk transfer between the banking book and the trading book
    • Liquidity risk and interest rate risk capitalisation on the trading book
  • Stress testing

Evaluation and Termination of the Course

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