Cebs stresses simplicity and communication in report on liquidity buffers
An interim report from Cebs gives preliminary views on developing liquidity survival periods, buffers and the assets they should contain
LONDON - The Committee of European Banking Supervisors (Cebs) has released an interim report highlighting the need for a simple and open approach to developing liquidity buffers and survival periods. The report is Cebs' response to a request from the Economic and Financial Committee and is part of the follow-up to Cebs 30 recommendations on liquidity risk management released in September 2008.
Cebs highlights the diversity of approaches to liquidity buffers across European Union national supervisors, and suggests a simple approach well communicated between stakeholders will allow for flexibility across the great breadth and complexity of institutions in the region.
Preliminary views are offered on steering the banking industry's approach to calibrating and determining the size and composition of liquidity buffers over a range of set time periods, in addition to taking stock of factors such as currency and differing legal jurisdictions. The proposals are the result of dialogue conducted through Cebs' Industry Expert Group on Liquidity.
Cebs says a liquidity buffer is dependent upon three dimenstions: the severity of stress scenarios, the time horizon determined as a 'survival period', and the characteristics of the assets in the buffer.
The report "tentatively" suggests one month is an adequate survival period. Assets used in a buffer should be highly liquid - convertible to cash "immediately or within a very short time". Banks should be able to closely estimate the amount of liquidity the assets can generate, through using haircuts when necessary.
Further work will try to determine the size of buffer necessary and the asset types it should contain. These refined proposals will be laid out in a consultation paper that Cebs says it will bring out in mid-2009.
The interim report can be read here.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Industry warns CFTC against rushing to regulate AI for trading
Vote on workplan pulled amid calls to avoid duplicating rules from other regulatory agencies
Bank of Communications moves early to meet TLAC requirements
China Construction Bank becomes last China G-Sib to release TLAC plans
Most read
- Top 10 operational risks for 2024
- Japanese megabanks shun internal models as FRTB bites
- LCH issued highest cash call in more than five years